Wrongful Dismissal
Cases
Wilson v Racher
[1974] ICR 428
Edmund Davies LJ,.
“ There is no rule of thumb to determine what misconduct on the part of a servant justifies summary termination of his contract. For the purpose of the present case, the test is whether the plaintiff’s conduct was insulting and insubordinate to such a degree as to be incompatible with the continuance of the relation of master and servant: per Hill J in Edwards v Levy (1860) 2 F&F 94, 95. The application of such test will, of course, lead to varying results according to the nature of the employment and all the circumstances of the case. Reported decisions provide useful, but only general guides, each case turning upon its own facts. Many of the decisions which are customarily cited in these cases date from the last century and may be wholly out of accord with current social conditions. What would today be regarded as almost an attitude of Czar-serf, which is to be found in some of the older cases where a dismissed employee failed to recover damages, would, I venture to think, be decided differently today. We have by now come to realise that a contract of service imposes upon the parties a duty of mutual respect.
What happened on Sunday June 11, emerges from the judge’s clear and helpful judgment, in which he reviews all the facts and sets out his findings. This court lacks the advantage of seeing and hearing the witnesses which was enjoyed by the judge. It needs to be stressed that the defendant now challenges none of the findings of fact. The story began on the preceding Friday afternoon when the plaintiff had been trimming a new yew hedge with an electric cutter. It was a damp afternoon, but the plaintiff carried on, taking shelter when the rain became heavy and then resuming his work when conditions improved. But at about 3.45 p.m. the rain was so heavy that the plaintiff could not continue because there was danger of his being electrocuted by the cutter. He then proceeded to oil and clean his tools until his day’s work was over. But he did make one mistake. He left a ladder leaning against a young yew hedge, which was an unfortunate thing to do. To that extent, the plaintiff was guilty of some dereliction of duty. But on the Sunday afternoon that was by no means the only topic discussed between the parties. It was after luncheon that the defendant and his wife and three young children were in the garden when the plaintiff passed and greeted them. The defendant asked where he was going, and the plaintiff replied that he was going to the garden shed to get his boots. Thereafter the defendant showered the plaintiff with questions. He shouted at him, and he was very aggressive. He accused the plaintiff of leaving his work prematurely on the Friday afternoon. The plaintiff explained that he had stopped cutting the hedge only because it would have been dangerous to continue, whereupon the defendant said, “I am not bothered about you, Wilson, that’s your lookout.” Though there was some reference to the ladder, the defendant did not make clear what his complaint was. But when the defendant accused the plaintiff of shirking his work on the Friday afternoon, there is no doubt that the plaintiff used most regrettable language, and it is part of my unpleasant duty to repeat it so as to make clear what happened. The plaintiff said: “If you remember it was pissing with rain on Friday. Do you expect me to get fucking wet?” The judge, who found that Mrs. Racher and the children did not hear those words, said:
“The plaintiff had a clear conscience, and he did reply somewhat robustly when he expressed the state of the weather. I think he felt under a certain amount of grievance at that remark.”
According to the judge, “The defendant then moved to what he thought was stronger ground,” thereby obviously referring to his determination to get rid of the plaintiff. The judge dealt with an allegation about a line of string having been left in the garden by the plaintiff, and commented:
“A more trivial complaint it would be difficult to imagine … It was an extremely trivial ground of complaint, if indeed justified at all. I think it is clear from this and other evidence that [the defendant] sets very high standards and this seems to me to be an absurdly high standard of tidiness. The defendant’s second barrel is very odd and illustrates that the defendant was determined to get the plaintiff on something.”
There was a dispute as to whether the string belonged to the plaintiff or to the defendant, and there was a complaint about leaving other things lying about. The judge accepted that the plaintiff moved away in an attempt to avoid any further altercation. But he was called back, and was then bombarded with questions. The defendant was going on at him, and this was, indeed, confirmed to some extent by the evidence of the defendant himself. Finally, the plaintiff told the defendant, “Get stuffed,” and “Go and shit yourself.”
These last two expressions were used by the plaintiff immediately before he was dismissed. He later apologised to Mrs. Racher for using such language, as to which the judge said, “One cannot condone them or commend them, but he said that when subjected to a number of petty criticisms and was not being allowed to go.” Despite the use of such language, the judge held that the plaintiff was entitled to say that he had been wrongly dismissed. Following upon the incident of June 11, the defendant sent to the plaintiff on June 16, a letter in the following terms:
“In accordance with the terms of the service agreement between us I hereby give you one month’s notice from the date of this letter, which confirms my oral notice given to you on Sunday, June 11, 1972. You will appreciate that no matter what your abilities as a gardener are, there can be no question of your remaining in my employment when you choose to use obscene four-letter words in the direct presence of my wife and in particular my children.”
The judge held that Mrs. Racher heard the second lot of expressions, but there was no finding as to whether the children had heard them.
Mr. Connell, who appeared for the defendant below, has with admirable clarity submitted that the judge arrived at a wrong finding. He rightly stresses the domestic nature of this particular contract of service, and says that, the plaintiff being engaged in a family setting, obscene language of the kind admittedly used by him could not possibly be tolerated. At one stage he submitted that so bad was the language that the plaintiff must be regarded as having himself repudiated the contract of service. But no such plea was advanced either in the defence or, as appears from the judgment, at the hearing. The sole question that accordingly arises is whether the language most regrettably employed by the plaintiff constituted such conduct as made the continuance of the contract of service impossible.
One of the cases that Mr. Connell referred to, Edwards v Levy (1860) 2 F. & F. 94 was decided over 100 years ago. Hill J there said, at p. 95:
“… as to behaving in an unbecoming manner, a single instance of insolence on the part of a gentleman employed in such a capacity would hardly justify dismissal; …”
A little later, in directing the jury, he said at p. 97 that one of the main questions was whether
“the plaintiff was guilty of such insulting and insubordinate conduct as to be incompatible with the continuance of the relationship subsisting between him and the defendant” — his employer — “as precluded the defendant from retaining him in his employ. … The parties met and were angry; some angry expressions escaped each of them. the defendant, according to the weight of evidence, first used provoking words; the plaintiff replied in the same way; the defendant desired him to go; the plaintiff said he was quite ready, and if the defendant desired him he must send for him. That last expression, coupled with the letter sent the next morning, seem to show that he was ready to continue in the employ.”
In that case, decided 114 years ago, the jury found for the plaintiff.
Pepper v Webb [1969] 1 W.L.R. 514 , a case which Mr. Connell seemed to regard as affording some measure of support for his argument, appears to me, on the other hand, to do nothing of the kind. In that case also the plaintiff was a gardener, but there was a history of complaints of insolence and inefficiency from time to time. The culminating incident was when the employer asked the plaintiff what arrangements he had made in relation to a greenhouse in his absence during the weekend. The plaintiff said: “I couldn’t care less about your bloody greenhouse or your sodding garden,” and walked away. Harman L.J. there said, at p. 517:
“Now what will justify an instant dismissal? — something done by the employee which impliedly or expressly is a repudiation of the fundamental terms of the contract; and in my judgment if ever there was such a repudiation this is it. What is the gardener to do? He is to look after the garden and he is to look after the greenhouse. If he does not care a hoot about either then he is repudiating his contract. That is what it seems to me the plaintiff did, and I do not see, having done that, that he can complain if he is summarily dismissed. It is said on his behalf that one act of temper, one insolent outburst, does not merit so condign a punishment. But this, according to the defendant, his employer, and I think rightly on the evidence, was the last straw. He had been acting in a very unsatisfactory way ever since April.”
And this was an incident which had occurred in June. That the court were there having regard not simply to the last incident of June 10, in isolation, but to the whole history, appears also from the other judgments, Russell L.J., for example, saying, at p. 518:
“I entirely agree that, against the background of what the plaintiff’s counsel must admit the deputy county court judge found or assumed to be quite a number of disobediences and a certain amount of insolence, it must be taken as conduct repudiatory of the contract justifying summary dismissal.”
The present case, too, has to be looked at against the whole background. On the judge’s findings, here was a competent, diligent and efficient gardener who, apart from one complaint of leaving a ladder against a yew tree, had done nothing which could be regarded as blame-worthy by any reasonable employer. Here, too, was an employer who was resolved to get rid of him; an employer who would use every barrel in the gun that he could find, or thought available; and an employer who was provocative from the outset and dealt with the plaintiff in an unseemly manner. The plaintiff lost his temper. He used obscene and deplorable language. He was therefore deserving of the severest reproof. But this was a solitary occasion. Unlike Pepper v Webb, there was no background either of inefficiency or of insolence. The plaintiff tried to avert the situation by walking away, but he was summoned back and the defendant continued his gadfly activity of goading him into intemperate language. Such are the findings of the county court judge.
In those circumstances, would it be just to say that the plaintiff’s use of this exteremely bad language on a solitary occasion made impossible the continuance of the master and servant relationship, and showed that the plaintiff was indeed resolved to follow a line of conduct which made the continuation of that relationship impossible? The judge thought the answer to that question was clear, and I cannot say that he was manifestly wrong. On the contrary, it seems to me that the parties could have made up their differences. The plaintiff apologised to Mrs. Racher. There are no grounds for thinking that if the defendant had given him a warning that such language would not be tolerated, and further, if he had manifested recognition that he himself had acted provocatively, the damage done might well have been repaired and some degree of harmony restored. Perhaps there was such instinctive antipathy between the two men that the defendant would, nevertheless, have been glad to get rid of the plaintiff when October 23, 1972, arrived.
In my judgment, in the light of the findings of fact the judge arrived at a just decision. that is not to say that language such as that employed by the plaintiff is to be tolerated. On the contrary, it requires very special circumstances to entitle a servant who expresses his feelings in such a grossly improper way to succeed in an action for wrongful dismissal. But there were special circumstances here, and they were of the defendant’s own creation. The plaintiff, probably lacking the educational advantages of the defendant, and finding himself in a frustrating situation despite his efforts to escape from it, fell into the error of explosively using this language. To say that he ought to be kicked out because on this solitary occasion he fell into such grave error would, in my judgment, be wrong. I am not persuaded that the judge was in error in holding that that was unfair dismissal, that it was wrongful dismissal, and that the plaintiff was entitled to the damages awarded. I would therefore be for dismissing the appeal.
Cairns LJ
“I agree that this appeal should be dismissed for the reasons which Edmund Davies LJ has given, and I only add, out of respect for the argument addressed to the court by Mr. Connell on behalf of the defendant, a few words about the other authority which he cited, namely, Laws v London Chronicle (Indicator Newspapers) Ltd [1959] 1 WLR 698 . That was a case where the plaintiff had been dismissed for disobedience. Lord Evershed MR in the course of a judgment with which the other members of the court, Jenkins and Willmer LJJ, agreed, said, at p. 701:
“… one act of disobedience or misconduct can justify dismissal only if it is of a nature which goes to show (in effect) that the servant is repudiating the contract, or one of its essential conditions; and for that reason, therefore, I think that you find in the passages I have read that the disobedience must at least have the quality that it is ‘wilful’: it does (in other words) connote a deliberate flouting of the essential contractual conditions.”
There is certainly nothing more essential to the contractual relation between master and servant than the duty of obedience. Another duty on the part of the servant, particularly in the case of a man in such employment as this plaintiff had, a gardener in a domestic situation, is the duty of courtesy and respect towards the employer and his family. That is an important part of his obligations. But I would apply to that duty the same considerations as Lord Evershed M.R. applied in relation to the duty of obedience. In my view, this was not a case where it can be said with any justice to the plaintiff that the way in which he behaved, regrettable though it was, was such as to show “deliberate flouting of the essential contractual conditions,” having regard to the unjust accusation which had been made against him.
I think it would have been wrong for the judge to have come to any other conclusion than that this was a wrongful dismissal. ”
Denco Ltd -v- Joinson
[1991] 1 WLR 330
UK
Secondly, the employers argue that if the motive of the employee is in any way material, it would only be that the management entertained a reasonable suspicion that the entry was for an improper motive.
The industrial members are clear in their view that in this modern industrial world if an employee deliberately uses an unauthorised password in order to enter or to attempt to enter a computer known to contain information to which he is not entitled, then that of itself is gross misconduct which prima facie will attract summary dismissal, although there may be some exceptional circumstances in which such a response might be held unreasonable. Basically, this is a question of “absolutes” and can be compared with dishonesty. However, because of the importance of preserving the integrity of a computer with its information it is important that management should make it abundantly clear to its workforce that interfering with it will carry severe penalties. Although it is not necessary to decide the practice in this case, cases may yet arise where evidence will show that the very tampering itself could produce malfunction with consequent damage and loss of information.
An analogy may be drawn with a situation where an employee enters the management offices of a company where he has no right to be, goes into an office, sees a key on the desk which he knows is the key to the filing cabinet which contains information to which he is not entitled and thereafter opens the filing cabinet and takes out a file.
If in the present case it had been material to consider whether there was evidence which in all the circumstances entitled management reasonably to have suspicion about the employee’s motive or purpose, then the present industrial members take the view that there was abundant such evidence. I agree with them.
When considering the issue of motive the industrial tribunal at one point say:
“Nor can we see on the menu anything to indicate that there was information which would have been the slightest use to [the employee] in his capacity as union negotiator.”
With respect that does not seem to us to be the point. The issue is what did the employee contemplate he might obtain by way of information by using the password of the wages department at Intek – a company by which he was not employed and the only connection with which would have been as a negotiator of pay.
….The industrial tribunal was extremely critical of the security arrangements made by the employers in connection with use of the computer. It may be that in the light of the indications made above another industrial tribunal would take a less serious view. We have in mind a comment made in an earlier decision of this appeal tribunal, C.A. Parsons & Co. Ltd. v. McLoughlin [1978] I.R.L.R. 65. The conduct which was suggested to be gross misconduct in that case was fighting and the passage to which we would refer is in the judgment given by Kilner Brown J. where he said, at p. 65, para. 3:
“All instances of fighting in factories raise very grave problems for the employer. There was made at one stage a point that there was nothing in the contract to prevent fighting. Some companies do have rules which specifically forbid it. All three of us here are unanimously of the opinion that in these days it ought not to be necessary for anybody, let alone a shop steward, to have in black and white in the form of a rule that a fight is something which is going to be regarded very gravely by management.”
It must surely be common sense that where a system such as the present has been instituted that the unauthorised use of a password is a very serious matter indeed. If it is not so realised by industry generally then perhaps this case will make it so. Unauthorised use of or tampering with computers is an extremely serious industrial offence. However it is clearly desirable to reduce into writing rules concerning the access to and use of computers and not only to post them but to leave them near the computers for reference.”
SG & R Valuation Service Co v Boudrais & Ors
[2008] EWHC 1340
MR JUSTICE CRANSTON: Absent an express provision for garden leave, can an employer achieve the same result in the case of misconduct by an employee? This question arises in relation to the first and second defendants, employees of the claimant
Mutual repudiatory breach
RDF Media Group plc v Clements [2007] EWHC 2892; [2008] IRLR 207 was advanced as authority for the proposition that an employee who has destroyed the mutual trust which is at the base of the employment relationship, who is, in other words, in repudiatory breach of contract, cannot purport to accept any separate repudiatory breach by the employer. Here it is said that if the claimant acted in repudiatory breach of contract by requiring the first and second defendants to stay at home, such a breach was a consequence of their prior breach of the implied duty of trust and confidence resulting from their earlier misconduct. Thus it would be inequitable to allow them to rely on an acceptance of a repudiatory breach by the claimant which arose only as a consequence of the prior breach of contract by them. The proposition is based on two House of Lords’ authorities, Bremer Vulcan Schiffbau und Maschinenfabrik v South India Shipping Corp [1981] AC 909 and Paal Wilson v Partenreederei Hannah Blumenthal [1983] 1 AC 854. In brief, the issue involved arbitration clauses where neither party pursued the arbitration with any great diligence. It was said that in that case there was a mutuality of obligation and a mutuality of breach and, therefore, neither party could rely on the other’s conduct as amounting to breach.
At present I remain unconvinced that, while there may be a mutuality of obligation, in particular of trust and confidence, in the employment relationship, there is, in the type of circumstances in this case, a mutuality of breach which justifies applying the approach in these two House of Lords’ authorities. Rather what I perceive as typical in this type of case is separate, sequential breaches, one by the employee and one by the employer. Moreover, I would be concerned about situations where, if the employee was in repudiatory breach, the employer could take whatever repudiatory breach it wished and the employer could not accept the employee’s repudiation as bringing the employment relationship to an end. That could lead to some very undesirable scenarios in the employment relationship. I understand the RDF case is on appeal.
Springboard relief
The claimant also puts the application on the basis of the springboard jurisdiction. That jurisdiction as a basis for an injunction began with confidential information and is designed to prevent the person with confidential information from taking advantage of the springboard which possession of it confers (for example, Roger Bullivant Ltd v Ellis [1987] ICR 464). The springboard operates for a period until the information is public, the confidence is lost, or for as long as it can be estimated the information can be lawfully assembled. The jurisdiction has been widened to neutralise any unfair advantage which those acting in breach of duty or those knowingly participating in their breach may obtain. It seeks to deprive wrongdoers of the fruits of their breach of duty and to restore the position to before the wrongdoing (Midas IT Services v Opus Portfolio Ltd 21st December 1999, a judgment of Blackburne J in the Chancery Division at pages 18 and 19.) In this case the claimant advanced the argument for springboard relief in particular on the basis of the breaches of fiduciary duty by the first and second defendants in not disclosing their wrongdoing. There is also the separate duty that senior employees have, a duty to report the misconduct of each other. The claimant argued that had the first and second defendants not breached those duties, the claimant would have been aware much earlier of the planned move to their competitors, the fourth and fifth defendants. Instead of the claimant being afforded the opportunity of nipping this threat in the bud, the defendants had furthered the competitive disadvantage which the claimant would suffer. As a consequence of the wrongdoing the defendants gained a head start in their endeavour of setting up in competition on behalf of the fourth and fifth defendants. In those circumstances, it is said, a springboard injunction is justified.
I am not persuaded that this is a case where the springboard jurisdiction should be exercised. The confidential information, as I indicated earlier, has been handed back or sterilised. There is no evidence that it has been used. In my view, it would be wrong to assume the misuse of information and to accept that the defendants have misled the court and lied on affidavit in the assurances they have given in this regard. The resignation of employees is lawful provided the notice period is served, and it is not unlawful to move to competitors. On the facts of this case, given the success of the claimant in forestalling matters, the springboard jurisdiction is not founded.
Balance of convenience
I have as far as possible made an assessment of the claimant’s prospects of success. In my view, the law supports the contention that it has not repudiated the contracts of employment with the first and second defendants and that the contracts continue until the lapse of the notice period. Nonetheless, it is necessary to consider the balance of convenience in granting injunctive relief. In this regard it is necessary to take into account the factors relevant to the exercise of discretion. On the one hand, in Provident Group plc v Hayward [1989] ICR 160 Dillon LJ indicated that where there was a period of notice under a contract of employment, and it was not an excessive period, then it may be said, forcefully and correctly, that employers should be able to obtain its protection. He said:
“I certainly would not wish to countenance the view that any employee can snap his fingers against his employers and disregard the notice provisions and obligations in his service agreement during his period of notice” (at 169).”
LTE V Clarke
[1981] ICR 355, [1981] IRLR 166
Templeman LJ
‘If a worker walks out of his job and does not thereafter claim to be entitled to resume work, then he repudiates his contract and the employer accepts that repudiation by taking no action to affirm the contract. No question of unfair dismissal can arise unless the worker claims that he was constructively dismissed. If a worker walks out of his job or commits any other breach of contract, repudiatory or otherwise, but at any time claims that he is entitled to resume or to continue his work, then his contract of employment is only determined if the employer expressly or impliedly asserts and accepts repudiation on the part of the worker. Acceptance can take the form of formal writing or can take the form of refusing to allow the worker to resume or continue his work. Where the contract of employment is determined by the employer purporting to accept repudiation on the part of the worker, the tribunal must decide whether the worker has been unfairly dismissed.’
Rigby v Ferodo Ltd
[1988] ICR 29
Lord Oliver House of Lords
‘It has been submitted that there was some sort of implied acceptance on the part of Mr Rigby of the appellant’s repudiation by working on. At the trial this was put on the basis of estoppel, waiver and acquiescence. All three were rejected by the trial judge and, in my judgment, he was, on the facts which he found, quite plainly right to reject them. I can, for my part, see no other basis upon which it can be argued that the continued working by Mr Rigby and his acceptance for the time being and under protest of the wage that the appellant, with full knowledge of his lack of agreement, chose to pay him is to be construed as an acceptance by him either of the repudiation by the appellant of the original continuing contract or of the new terms which the appellant was seeking to impose.’
….. ‘For my part I see no reason in law or logic why, leaving aside for the moment the extreme case of outright dismissal or walk- out, a contract of employment should be on any different footing from any other contract as regards the principle that ‘an unaccepted repudiation is a thing writ in water and of no value to anybody’; per Asquith LJ in Howard v Pickford Truck Co.’ “
Lewis v Motorworld Garaages Ltd
[1986] ICR 157, [1985] IRLR 46
Glidewell LJ
‘This breach of this implied obligation of trust and confidence may consist of a series of action on the part of the employer which cumulatively amount to a breach of the term, though each individual incident may not do so. In particular in such a case the last action of the employer which leads to the employee leaving need not itself be a breach of contract; the question is, does the cumulative series of acts taken together amount to a breach of the implied term? ‘ This is the ‘last straw’ doctrine.’ and
‘This case raises another issue of principle which, so far as I can ascertain, has not yet been considered by this court. If the employer is in breach of an express term of a contract, of such seriousness that the employee would be justified in leaving and claiming constructive dismissal, but the employee does not leave and accepts the altered terms of employment; and if subsequently a series of actions by the employer might constitute together a breach of the implied obligation of trust and confidence; is the employee then entitled to treat the original action by the employer which was a breach of the express terms of the contract as a part – the start – of a series of actions which, taken together with the employer’s other actions, might cumulatively amount to a breach of the implied terms? In my judgment the answer to this question is clearly ‘yes’.
It follows, in my judgment, then in the present case the industrial tribunal should have asked themselves the question whether the employer’s treatment of the employee starting with the demotion in November 1981 including reduction in pay, the loss of the use of the use of an office and the various memoranda of complaint in 1982, culminating in that of 2 August 1987, cumulatively constituted a breach of the implied obligation of trust and confidence of sufficient gravity to justify the employee in leaving his employment in August 1982 and claiming that he had been dismissed. Did the Tribunal ask themselves this question, and if so how did they answer it? In so posing the question, I realise that I am, with respect, disagreeing with the approach of the appeal tribunal.’
Neill LJ
‘Moreover where an employee complains that he has been constructively dismissed, it is necessary for him to prove that he terminated the contract in circumstances such that he was entitled to terminate it without notice by reason of the employer’s conduct: see section 55(2) of the Act of 1978. The conduct must be repudiatory and sufficiently serious to enable the employee to leave at once. On the other hand it is now established that the repudiatory conduct may consist of a series of acts or incidents, some of them perhaps quite trivial, which cumulatively amount to a repudiatory breach of the implied term of the contract of employment that the employer will not, without reasonable and proper cause, conduct himself in a manner calculated or likely to destroy or seriously damage the relationship of confidence and trust between employer and employee: see Woods v W.M. Car Services (Peterborough) Ltd. [1981] ICR 666 in the Employment Appeal Tribunal.’
Notcutt v Universal Equipment Company (London) Ltd
[1986] EWCA Civ 3
“The arguments of Mr Allen for the appellant are firstly, and generally, that the doctrine of frustration can have no application to a periodic contract of employment because there is no need for it – the contract can always be terminated by short or relatively short notice – and secondly that in the circumstances of the present case there was no frustration as absence for sickness, injury or incapacity was envisaged by the contract and also by paragraph 3 of schedule 3 to the Act.
In Harman v Flexible lamps Ltd (1980) IRLR 418 Bristow J commented at page 419 as follows: “In the employment field the concept of discharge by operation of law, that is frustration, is normally only in play where the contract of employment is for a long term which cannot be determined by notice. Where the contract is terminable by notice, there is really no need to consider the question of frustration and if it were the law that in circumstances such as are before us in this case an employer was in a position to say ‘this contract has been frustrated’ then that would be a very convenient way in which to avoid the provisions of the Employment Protection (Consolidation) Act. In our judgment that is now the law in these sort of circumstances.”
In the present case, the argument of frustration is of course unashamedly put forward to avoid the provisions of the Act; in that it has succeeded in the court below.
Notwithstanding the views expressed by Bristow J, however, there have been several cases in the National Industrial Relations Court and the Employment Appeal Tribunal in which those courts have considered that a contract of employment which is terminable by relatively short notice is in law capable of being terminated, without notice, by frustration as a result of the illness of the employee, and those courts have endeavoured to list by way of guideline the factors of which account should be taken in considering whether a particular such contract has been so frustrated. See Marshall v Harland & Wolf Ltd (1972) 1 WLR 899, Egg Stores (Stamford Hill) Ltd v Leibovici (1977) ICR 260 and Hart v A. E. Marshall & Sons (Bulwell) Ltd (1977) ICR 539. The judge in the present case was in his judgment endeavouring to apply the guidelines laid down in those cases to the facts of the present case.
In this court, in Hare v Murphy Brothers Ltd (1974) 3 AER 940, Lord Denning M.R. held that a contract of employment of a workman was frustrated when the man was sentenced to imprisonment for 12 months. In reaching that conclusion Lord Denning M.E. considered by way of analogy that if the man had been grievously injured in a road accident and incapacitated for 8 months his contract of employment would be frustrated. However, though the man’s contract was presumably determinable on short notice, no argument was founded on this; the discussion seems to have been over whether the contract was terminated by frustration or by repudiatory breach on the part of the man in committing the offence for which he was imprisoned.
For my part, as a periodic contract of employment determinable by short or relatively short notice may none the less be intended in many cases by both parties to last for many years and as the power of the employer to terminate the contract by notice is subject to the provisions for the protection of employees against unfair dismissal now in the Act, I can see no reason in principle why such a periodic contract of employment should not in appropriate circumstances be held to have been terminated without notice by frustration according to the accepted and long established doctrine of frustration in our law of contract. The mere fact that the contract can be terminated by the employer by relatively short notice cannot of itself render the doctrine of frustration inevitably inapplicable. Accordingly the words of Bristow J cited earlier in this judgment must be taken as no more than a warning that the court must look carefully at any submission that a periodic contract of employment has been discharged by frustration if that submission is put forward to avoid the provisions of the Act; if Bristow J intended to go further than that I cannot agree with him.
The principles that govern the doctrine of frustration are conveniently to be found in the speeches of Lord Reid and Lord Radcliffe in Davis Contractors Ltd v Fareham Urban District Council (1956) AC 696. Lord Reid said at page 721: “In my view, the proper approach to this case is to take … all facts which throw light on the nature of the contract, or which can properly be held to be extrinsic evidence relevant to assist in its construction and then, as a matter of law, to construe the contract and to determine whether the ultimate situation … is or is not within the scope of the contract so construed.”
Lord Radcliffe, in a much quoted passage, said at pages 728-9: “So perhaps it would be simpler to say at the outset that frustration occurs whenever the law recognizes that without default of either party a contractual obligation has become incapable of being performed because the circumstances in which performance is called for would render it a thing radically different from that which was undertaken by the contract. Non haec in foedera veni. It was not this that I promised to do.
“There is, however, no uncertainty as to the materials upon which the court must proceed. ‘The data for decision are, on the one hand, the terms and construction of the contract, read in the light of the then existing circumstances, and on the other hand the events which have occurred’ (Denny, Mott & Dickson Ltd. v James B. Fraser & Co. Ltd.,” (1944) AC 265, 274 S “per Lord Wright). In the nature of things there is often no room for any elaborate inquiry. The court must act upon a general impression of what its rule requires. It is for that reason that special importance is necessarily attached to the occurrence of any unexpected event that, as it were, changes the face of things. But, even so, it is not hardship or inconvenience or material loss itself which calls the principle of frustration into play. There must be as well such a change in the significance of the obligation that the thing undertaken would, if performed, be a different thing from that contracted for. “
Mr Allen for the appellant urges that there is a further factor which must be satisfied before it can be said that a contract has been terminated by frustration – it must be shown that it would be unjust to hold the parties to the literal terms of their contract. He therefore submits that there is no injustice in holding the parties in this case to their contract, despite the doctor’s report and the subsequent conversation between the appellant and Mr Johnson, because the respondents were under no obligation under the contract to pay the appellant while he was away sick, and if they chose to terminate his contract by notice there could be no injustice in requiring them to pay him sick pay which the statute in that event required them to pay.
To establish this further factor, Mr Allen relies on various statements in the authorities such as the passages in the speech of Lord Simon of Glaisdale in National Carriers Ltd y Panalpina (Northern) Ltd (1981) AC 675, where he says, at page 700F: “Frustration of a contract takes place where there supervenes an event … which so significantly changes the nature (not merely the expense or onerousness) of the outstanding contractual rights and/or obligations from what the parties could reasonably have contemplated at the time of its execution that it would be unjust to hold them to the literal sense of its stipulations in the new circumstances”, and again at page 701E that the doctrine of frustration is “on the face of it apt to vindicate justice wherever owing to relevant supervening circumstances the enforcement of any contractual arrangement in its literal terms would produce injustice.”
I do not for my part see that these references to justice or injustice introduce any further factor. If the unexpected event produces an ultimate situation which, as a matter of construction, is not within the scope of the contract or would render performance impossible or something radically different from that which was undertaken by the contract, then it is unjust that the contracting party should be held to be still bound by the contract in those altered circumstances. I approach the facts of this case on the footing that the test to be satisfied is that explained by Lord Reid and Lord Radcliffe in the passages above set out.
The appellant’s contract provided that the respondents were not bound to pay the appellant while he was absent from work because of sickness, injury or incapacity. The contract thus envisaged the possibility that he might be away from work because of sickness, injury or incapacity. But as a matter of construction of the contract I cannot hold that the reference to injury would cover an injury which totally disabled him from performing his work under the contract, e.g. if the operation of the milling machine requires the use of his right hand and he lost his right arm, or was rendered quadriplegic in an accident away from work which was not his fault and had nothing to do with his employers. In such a case his accident would have caused his contract of employment to be frustrated as a matter of law. Again, if sickness or incapacity are considered rather than injury, the result would be the same if, e.g., he had a stroke which left his right side permanently paralysed.
On the actual facts of the present case, the effect of his coronary could not initially be assessed. But when more than six months later the doctor made his report, both parties appreciated, on the judge’s findings, that he was not going to work again. He was totally incapacitated from performing the contract. That was a situation which, in my judgment, was outside the scope of the contract properly construed. To put it another way, the coronary which left him unable to work again was an unexpected occurrence which made his performance of his contractual obligation – to work – impossible and brought about such a change in the significance of the mutual obligations that the contract if performed would he a different thing from that contracted for.
In these circumstances I am unable to accept the arguments for the appellant. The judge approached the case on a correct basis and I agree with his conclusion. Accordingly, though I feel much sympathy with the appellant in that his working life has been cut short by illness or incapacity, I would dismiss this appeal.”
Williams -v- Watsons Coaches Limited
[1990] ICR 536
President Sir John Wood
“A number of principles relevant to the application of the doctrine to contracts of employment can be derived from these decisions which, in any event, are rare occurrences in the realm of employment law.
First, that the court must guard against too easy an application of the doctrine, more especially when redundancy occurs and also when the true situation may be a dismissal by reason of disability. Secondly, that although it is not necessary to decide that frustration occurred on a particular date, nevertheless an attempt to decide the relevant date is far from a useless exercise as it may help to determine in the mind of the court whether it really is a true frustration situation. Thirdly, that there are a number of factors which may help to decide the issue as they may each point in one or other direction. ” (reference to Egg Stores (Stamford Hill) Ltd . . . To these we would add the terms of the contract as to the provisions for sickness pay, if any, and also, a consideration of the prospects of recovery. Fourthly – see F C Shepherd & Co Ltd v. Jerrom [1986] I.C.R. 802 – the party alleging frustration should not be allowed to rely upon the frustrating event if that event was caused by that party – at least where it was caused by its fault.”
James v The Greytree Trust
[1996] UKEAT 699_95_1701
UK EAT JUDGE ALTMAN:
The question of the relationship of frustration to the modern law of employment is a very difficult one as Lord Mustill pointed out in one case; “the doctrine of frustration has developed over many years through the common law, the law which is applied generally in relation to employment nowadays is very often statutory law and it is difficult to marry the two.” Take for instance, the question of redundancy. The redundancy arises because the work has gone. Could one very often have a better example of frustration? But it is very rare in those cases of redundancy which are brought about through no action of the employer and which are outside the control of the employer. But one does not hear of such situations being described as frustration.
In considering this case and those principles we apply the law to which our attention has been directed. I have quoted already from Marshall v Harland & Wolff through the reference to Hebden v Forsey & Son. That case also deals with the general relationships, the absence of any indication of termination and its effect, and points out one factor which must weigh with a tribunal is the fact that a person is a key employee, which in a different way applies in this case. We have also been referred to the case of Egg Stores (Stamford Hill) Limited v Leibovici which is a decision of Phillips J. which provides something of a gloss upon the decision of Marshall v Harland & Wolff where at page 264 of the Industrial Court Reports for 1977 Phillips J. refers to the definition to which I have already referred:
“That is helpful, but one needs to know in what kind of circumstances can it be said that further performance of his obligations in the future will be possible? It seems to us that an important question to be asked in cases such as the present – we are not suggesting that it is the only question – is: “has the time arrived when the employer can no longer reasonably be expected to keep the absent employee’s post open for him?” …”
and points out how similar that is to the question of dismissal. This matter was then further considered in the case of Williams v Watson Luxury Coaches Limited [1990] ICR 536. That is a very helpful decision in which the Employment Appeal Tribunal deal quite extensively with the history of the law in this matter. They set out at page 541 the following propositions:
” A number of principles relevant to the application of the doctrine to contracts of employment can be derived from these decisions which, in any event, are rare occurrences in the realm of employment law.
First, that the court must guard against too easy an application of the doctrine, more especially when redundancy occurs and also when the true situation may be a dismissal by reason of disability. Secondly, that although it is not necessary to decide that frustration occurred on a particular date, nevertheless an attempt to decide the relevant date is far from a useless exercise as it may help to determine in the mind of the court whether it really is a true frustration situation. Thirdly, that there are a number of factors which may help to decide the issue as they may each point in one or other direction. These we take from Phillips J. In Egg Stores (Stamford Hill) Ltd v. Leibovici [1977] I.C.R. 260, 265:
“Among the matters to be taken into account in such a case in reaching a decision are these: (1) the length of the previous employment; (2) how long it had been expected that the employment would continue; (3) the nature of the job; (4) the nature, length and effect of the illness or disabling event; (5) the need of the employer for the work to be done, and the need for a replacement to do it; (6) the risk to the employer of acquiring obligations in respect of redundancy payments or compensation for unfair dismissal to the replacement employee; (7) whether wages have continued to be paid; (8) the acts including the dismissal of, or failure to dismiss, the employee; and (9) whether in all the circumstances a reasonable employer could be expected to wait any longer.”
To these we would add the terms of the contract as to the provisions for sickness pay, if any, and also, a consideration of the prospects of recovery. Fourthly – see F C Shepherd & Co Ltd v. Jerrom [1986] I.C.R. 802 – the party alleging frustration should not be allowed to rely upon the frustrating event if that event was caused by that party – at least where it was caused by its fault.”[Which does not apply in this case]
Then there was a difference in the argument between him and the lay members with whom he sat. But he did quote the industrial members, and it is of some importance when looking at the one aspect of what parties would expect when looking at this sort of contract. He says that they (the members) believe that:
“the doctrine of frustration when applied to employment contracts is one which, unless severely limited in its scope, can do harm to good industrial relations as it provides an easy escape from the obligations of investigation which should be carried out by a conscientious employer.”
He quotes again Sir John Donaldson from the Marshall v Harland Wolff case:
“We have been caused some concern by Mr Bingham’s suggestion that our decision could lead to employers abandoning the admirable practice of keeping sick employees `on the books’, …[then the suggestion of a `holding department’ is explained].”
[And goes on]:
My own approach is rather different [that is to the members] but, before explaining, it is important to remind myself that although I would most likely have approached these facts from the basis of redundancy and disability, it is for an industrial tribunal to find the facts and that unless there is a misdirection of law it is not for this appeal tribunal to interfere.”
We have found the misdirection of law and feel driven therefore, to interfere. He then concludes:
“Apart from these two passages there are three statements of principle of law upon which the industrial tribunal depends and directs itself.
First, that the legal effect of frustration does not depend upon the intention, opinion or knowledge of the parties as to the event. Secondly, that there is no necessity to decide a precise date upon which frustration occurs. Neither of these is open to criticism and is with respect clearly correct.[Referring back to the decision. He goes on to deal with the details of the decision].”
We have looked at all the facts in relation to those principles. It was a very short period of time between the applicant’s request for consideration for redundancy and the employers’ determination that there had been frustration. They were willing to reach that judgment at a very early stage. Therefore it seems to us that it is not a case in which one can say that the employer in this case had reached a conclusion on due consideration that the employment was at an end. But even if that were his opinion, we look at the objective facts in addition, which show that in relation to the length of service this was by no means an excessively long period of absence, and one in which many employers would only just be beginning to bring into play the ordinary investigation procedures for long-term incapacity and which, in this particular case, the respondents had not begun to do.
We also take into account the terms of contract between the parties and the very great difficulty in distinguishing the facts of this case from the ordinary incapacity case. We have come to the conclusion looking at all the facts and considering the principles to apply, and the statutory framework which dominates nowadays contracts of employment more and more and the thoughts behind that, and the particular views expressed of the members and the repeated references in cases to the need to avoid slipping automatically into frustration as a parallel to incapacity, that this was not a case in which the contract had been frustrated.”
Birch v University of Liverpool
[1985] EWCA Civ 8 [1985] ICR 470, [1985] IRLR 165
LORD JUSTICE ACKNER
I come then to paragraph 13, which is put forward by the Industrial Tribunal as an alternative basis for their decision. In a sentence what they are saying, as I understand it, is: “the present situation before us is a Burton, Allton & Johnson Ltd. v. Peck situation and that entitles us to find that the University dismissed the appellants within the meaning of the section”. I therefore come straight to that decision which is reported in [1975] ICR, 193. The material facts of the case can be shortly stated. The employee had been off work on account of his illness for quite some time. His employers considered that it would be in his own interests to accept redundancy, but they were concerned as to whether this could be done while he was still away sick. When he returned to work he was seen by the area supervisor; he was told there was no work for him, but that a meeting was to be arranged between the area supervisor and him in order that they should both go to the employment exchange. The majority of the Industrial Tribunal found that the employee had been dismissed on the day of his return to work. Mr. Justice Griffiths (as he then was) presided over the tribunal and at page 197 he said:
“It seems to me, in the face of the evidence, that [the area supervisor] told the employee that there was nothing for him, that he knew he was to be made redundant, and that he was sent home without work or pay, that it is impossible to say that there was no evidence on which the lay members could come to the conclusion that he was in fact dismissed on the occasion of the meeting between him and [the area supervisor].”
The part which is essentially relied upon is how Mr. Justice Griffiths dealt with the submission that, on the evidence, Mr. Peck (the employee) was very ready to be dismissed on the grounds of redundancy and that accordingly the termination of the contract was by mutual consent, rather than by the unilateral dismissal by the employer. At page 198, Mr. Justice Griffiths said this:
“It must be appreciated that it is to be hoped that in the large majority of cases where a man is made redundant, it will be effected after discussions and where both parties are in agreement that that is the best course to take. In any large organisation one expects to find that there are consultations between management and unions to thrash out the whole redundancy situation, that the employees are then brought into discussions and that the first to be made redundant are those who volunteer for it. One also hopes that before they are made redundant very serious attempts will have been made to have other employment ready for them. But the fact that all that is done does not prevent the dismissal, when it comes, being a dismissal within the terms of section 3(1) (a) of the Act.”
He therefore held that the fact that Mr. Peck had agreed to the redundancy was no ground for holding that it was not a dismissal.
This case was relied upon before the Employment Appeal Tribunal, and this is what Mr. Justice Nolan said:
“As we understand that decision, it was based upon the finding by the majority of the industrial tribunal that Mr. Peck’s contract of employment had been terminated by his dismissal. The passages in the judgment of the learned judge which we have quoted are designed to make it clear that the fact that an employee has no objection to being dismissed, or even volunteers to be dismissed, does not prevent his dismissal, when it occurs, from being a dismissal within the meaning of the Act. We do not read the judgment as encroaching in any way upon the distinction which exists in law between a contract which is terminated unilaterally (albeit without objection, and perhaps even with encouragement from the other party) and a contract which is terminated by mutual agreement. The phrase “consensual dismissal” which the industrial tribunal used seems to us, with respect, to blur this critical distinction. In every case it will be necessary to determine what it is that has had the effect, as a matter of law, of terminating the particular contract, and on the undisputed facts of the present case it seems to us clear for the reasons already given that the termination was effected by mutual agreement and not be dismissal.”
I endorse wholeheartedly those observations, which seem to me to meet entirely the point made that this is a Burton, Allton & Johnson situation.
A further case was drawn to our attention, and indeed to the attention of the Employment Appeal Tribunal, and that was Lancashire County Council v. Hallam, which is unreported. It is a decision of the Employment Appeal Tribunal given on 7th April 1982 and was presided over by the then President, Mr. Justice Browne-Wilkinson, as he then was. In that case the Department of Education and Science introduced a premature retirement scheme for teachers which could be, and in fact was, adopted by the County Council. The purpose of the scheme was to reduce the numbers of teachers at schools maintained by the County Council since overall the requirements of teachers had diminished. The scheme extended both to teachers whose contract of employment was with the County Council and to teachers at aided schools who, although employees of the Governors, were ultimately paid by the County Council. Under the scheme, any eligible teacher could apply for premature retirement. Mr. Justice Browne-Wilkinson said this:
“If his teaching post was redundant, his application would at once be accepted and he would be dismissed on the grounds of redundancy. But if the applicant’s own teaching post was not itself redundant, his application could not be accepted unless and until another teacher (whose own post was redundant) had resigned from that redundant post and been accepted to fill the post of the applicant for premature retirement. Applicants for premature retirement received accelerated and improved pensions and were told that ‘generally’ they would also be entitled to a redundancy payment.”
To my mind this statement clearly suggests that there was to be a dismissal within the meaning of the Act. In giving the judgment of the Appeal Tribunal, Mr. Justice Browne-Wilkinson referred to the part of the judgment of Mr. Justice Griffiths, to which I referred earlier in my judgment, and said:
“Applying that to the present case, the County Council put forward the early retirement scheme and invited Mr. Hallam and other eligible teachers to apply for voluntary redundancy. Although Mr. Hallam was a consenting party, he was in fact sent a letter expressly terminating his employment on 31st August 1981. It was that letter which brought the employment to an end. In our view the case falls directly within the principle stated by Griffiths, J., and in the circumstances this is not to be regarded as a consensual resignation, just because Mr. Hallam was a willing party.”
It seems to me that the learned judge is recognising, although not deciding, that you can have a consensual resignation in a redundancy situation; but I agree with the view of the Employment Appeal Tribunal in the instant appeal that the scheme was materially different from the one with which we are concerned, as was indeed the method of terminating the contract of employment, and I do not therefore find it of any assistance.
Accordingly, for the reasons which I have given, I would dismiss this appeal, being satisfied that the Employment Appeal Tribunal had jurisdiction to entertain an appeal and that their decision was wholly correct in every particular.”
United Bank Ltd v Akhtar
[1989] UKEAT 230_88_1210
Mr. JUSTICE KNOX
“The principal issue in this case, as argued by Mr. Lynch before us, is whether or not it was right as a matter of interpretation of the terms of employment of Mr. Akhtar, to imply the terms which the Industrial Tribunal did. They seem to us to be three in number. The first is derived from paragraph 11, which I have already read an extract from, that is to say “they failed to give Mr. Akhtar any reasonable notice of the move, which must also inevitably be implied in any such term of employment”. That is, an implication of a requirement that reasonable notice should be given in the exercise of the power which the Bank undoubtedly has to require mobility amongst its employees and which it is notable that, at no stage, Mr. Akhtar challenged as a power.
The second implication that the Industrial Tribunal was able to make, was one that the mobility clause must be operated in such a way as to make it feasible. Their actual words bear repetition, they are:
“In other words, without reading into the contract an implied term so as to render the mobility clause feasible, the employer would effectively be driving one of its lowest paid employees out of his employment under the contract of employment which was then subsisting at the Leeds branch as between themselves and Mr. Akhtar.”
Coupled with their factual finding that unless the Bank were to exercise their discretion by implementing relocation and other allowances, their actions would make the employee attempt to perform something which, in practical terms, was quite impossible. That, in our view, amounts to an implication of a term that the discretion contained in Clause 13 was to be exercised in such a way as not to render impracticable the obligation thereby in the earlier part of the clause, imposed on the employee to change his place of employment. One can re-phrase such an implication of the way in which the discretion is required to be exercised by putting it as follows: that the discretion is one which the employer is bound to exercise in such a way as not to render the performance by the employee of his obligations to move impossible.
The third implication is a much more general one and is to be found in the extract which Mr. Lynch accepted as stating the law, from Mr. Justice Browne-Wilkinson’s Judgment in Woods v W.M. Car Services (Peterborough) Ltd. (1981) ICR 670 where he said this:
“In our view it is clearly established that there is implied in a contract of employment a term that the employers will not, without reasonable and proper cause, conduct themselves in a manner calculated or likely to destroy or seriously damage the relationship of confidence and trust between employer and employee: Courtaulds Northern textiles Ltd. v. Andrew (1979) I.R.L.R. 84. To constitute a breach of this implied term it is not necessary to show that the employer intended any repudiation of the contract: the tribunal’s function is to look at the employer’s conduct as a whole and determine whether it is such that its effect, judged reasonably and sensibly, is such that the employee cannot be expected to put up with it.”
……
It seems to us that once that admission is made there is very little difference indeed between a duty to give reasonable notice, which the Industrial Tribunal found as an implication, on the one hand, and a duty to co-operate and not to frustrate the other side’s attempt to perform its contract, on the other. We find that the Industrial Tribunal was well entitled to imply a term requiring such reasonable notice and we do not see any significant difference, as I have said, between that and what Mr. Lynch accepted, was their implied obligation.
As regards the giving of relocation allowance or other allowances, it is of course plain that the Bank has a discretion. It seems to us that there is a fallacy in the argument that an employee, by accepting employment on terms which include the grant of such a discretion to an employer, was thereby accepting that he would be under an obligation to move without any financial assistance at all, if the Bank thought fit to require such a move.
What Mr. Akhtar, by signing the contract, accepted was that there was conferred upon the Bank a discretion. What Mr. Akhtar did not, in our view, accept, was that the Bank, in any particular circumstances, would necessarily not be under an obligation to exercise that discretion. It seems to us that there is a clear distinction between implying a term which negatives a provision which is expressly stated in the contract and implying a term which controls the exercise of a discretion which is expressly conferred in a contract. The first is, of course, impermissible. We were referred to authority for that proposition but authority is hardly needed for it. The second, in our judgment, is not impermissible because there may well be circumstances where discretions are conferred but, nevertheless, they are not unfettered discretions, which can be exercised in a capricious way.
The same acceptance of an implied obligation to co-operate and not to frustrate another party’s attempt to perform a contract, would appear to point in the same direction because the facts, as found by the Industrial Tribunal, in our judgment, clearly indicate that the Bank was acting or, rather, failing to act, in a manner which frustrated Mr. Akhtar’s attempts to perform the obligation which he accepted of removing his seat of activities on behalf of the Bank from Leeds to Birmingham.
It, therefore, follows that the contract does, in our view, include as a necessary implication, first the requirement to give reasonable notice and, secondly, the requirement so to exercise the discretion to give relocation, or other allowances in such a way as not to make performance of the employee’s duties impossible.
We see no conflict between that conclusion and the well established principles to which Mr. Lynch drew our attention that terms can only be implied in contract at common law in clearly defined circumstances and according to well established rules. The first to which we were referred was that no term can be implied which is contrary to or inconsistent with an express term and, upon this aspect of the matter, we have already expressed our view. There is no conflict between a limit on the way in which a discretion can be exercised, on the one hand, and the existence of the discretion on the other.
Secondly, we accept that it is now well-established that implications of a term in a contract, which the parties have reduced to writing, can only be made first to give business efficacy to their contracts; secondly, where the implication is to give effect to an obvious combined intention of the parties and, thirdly, where it is a necessary addition to the expression of the particular relationship between the parties and an implication which completes their contractual arrangements. Reference was made to Chitty on Contracts paragraph 847 which sums up this branch of the law by saying:
“The touchstone is always necessity and not merely reasonableness.”
Those arguments are aimed at the construction of the contract and the question whether or not an implication can be made in it.
The third principle, which is enunciated by Mr. Justice Browne-Wilkinson’s Judgment, from which I read an extract, is of much wider import and is capable of applying to a series of actions by an employer, which individually can be justified as being within the four corners of the contract because we take it as inherent in what fell from Mr. Justice Browne-Wilkinson that there may well be conduct which is either calculated or likely to destroy or seriously damage the relationship of confidence and trust between employer and employee, which a literal interpretation of the written words of the contract might appear to justify and it is in this sense that we consider that in the field of employment law it is proper to imply an overriding obligation in the terms used by Mr. Justice Browne-Wilkinson, which is independent of, and in addition to, the literal interpretation of the actions which are permitted to the employer under the terms of the contract. On that aspect of the matter, we have the Industrial Tribunal’s finding that the situation here was that the Bank’s conduct, in which we include inactivity rather than activity, was such that if one looks at it reasonably and sensibly, it was such that the employee could not be expected to put up with it.”
Aparau v Iceland Frozen Foods Plc
[1995] UKEAT 196_93_0910
JUDGE HICKS Q.C.:
We deal then with those three ways in which the Tribunal reached its conclusion.
As to the first, whether Mrs Aparau accepted the new terms which the respondents, Iceland Frozen Foods sought to incorporate in the contract, we start from the position that Iceland Foods were not entitled unilaterally to alter the contract, nor indeed do they put their case on that basis. The question is whether there was a fresh contract, whether by way of the old or substitution for it. Clearly, in the traditional analysis of contract formation, the circulation by Iceland Frozen Foods of those terms was an offer Mrs Aparau could accept or reject. The mode of acceptance was in fact specified by Iceland Frozen Foods, the person making the offer, because, as I have said, the form contained in Clause 20 an express acceptance which the employee was invited to sign and return.
We therefore start from the position which is helpfully summarised in Chitty on Contracts 27th Edition, paragraph 2-042:
“An offer which requires the acceptance to be expressed or communicated in a certain way can generally be accepted only in that way.”
Then at paragraph 2-045:
“Even if the prescribed method of acceptance is not complied with, the offeror would no doubt be bound if he had acquiesced in a different mode of acceptance and had so waived the stipulated mode.”
2-047:
“An offeree who does nothing in response to an offer is not bound by its terms. This is so even though the offer provides that it can be accepted by silence.”
At 2-050:
“The general rule that there can be no acceptance by silence does not mean that an acceptance always has to be given in so many words. An offer can be accepted by conduct; and this is never thought to give rise to any difficulty where the conduct takes the form of a positive act.”
So much by way of background and really uncontroversial general principles.
The difficulty in the present case was of course that there was no positive act of acceptance, neither the prescribed act of signing and returning the duplicate form nor any other positive act in the sense of a change, because all that happened was that Mrs Aparau went on working at the same place and being paid exactly as before. The question is whether her doing so, and specifically in the terms of the Industrial Tribunal’s judgment doing so for as long as 12 months, could of itself amount to an acceptance.
There is, in our view, a helpful passage on the application of the general principles to the particular circumstances of an employment contract in the case in this Appeal Tribunal of Jones v Associated Tunnelling Co. Ltd [1981] IRLR 477, and the relevant passage begins in paragraph 21 of the judgment, where the Tribunal was dealing, again, with a case where there had been varied terms issued by the employers but not signed by the employee, who had simply continued working without outward change of circumstance. Dealing with the situation where an employer issues a statutory statement of terms of conditions of employment, the Tribunal say this:
“… the first of such statements to be issued is often compelling evidence of what terms have in fact been agreed. [That, I interpose, is not strictly applicable here, because it seems from the Industrial Tribunal’s findings that the Bejam contract was not simply a statutory statement, but was in fact the contract. However, that does not affect what follows in the judgment in the Jones case, which continues:] But where there are two or more statements which are not in identical terms, the later statement can only be evidence of an agreed variation of the original terms. Such variation may be either express or implied. If, as in the present case , there is no evidence of any oral discussion varying the original terms , the fact that a statement of terms and conditions containing different terms has been issued cannot be compelling evidence of an express oral variation. The most that can be said is that by continuing to work without objection after receiving such further statement, the employee may have impliedly agreed to the variation recorded in the second statement or be estopped from denying it.
In our view, to imply an agreement to vary or to raise an estoppel against the employee on the grounds that he has not objected to a false record by the employers of the terms actually agreed is a course which should be adopted with great caution. If the variation related to a matter which has immediate practical application (eg, the rate of pay) and the employee continues to work without objection after effect has been given to the variation (eg, his pay packet has been reduced) then obviously he may well be taken to have impliedly agreed. But where, as in the present case, the variation has no immediate practical effect the position is not the same. It is the view of both members of this Tribunal with experience in industrial relations (with which the Chairman, without such experience, agrees) that it is asking too much of the ordinary employee to require him either to object to an erroneous statement of his terms of employment having no immediate practical impact on him or to be taken to have assented to the variation. So to hold would involve an unrealistic view of the inclination and ability of the ordinary employee to read and fully understand such statements.
Even if he does read the statement and can understand it, it would be unrealistic of the law to require him to risk a confrontation with his employer on a matter which has no immediate practical impact on the employee. For those reasons, as at present advised, we would not be inclined to imply any assent to a variation from mere failure by the employee to object to the unilateral alteration by the employer of the terms of employment contained in a statutory statement.”
Now that was in Jones obiter, in the sense that the Employment Appeal Tribunal decided the appeal on the basis of an implied term, and indeed we must to this case return when we deal with the issue of implied terms. But it is manifestly a considered statement on the application of the law as to acceptance by conduct or by continuation of a state of affairs in the employment field, and in our view is entitled to considerable weight, and indeed we agree with it, both as a statement of law and, so far as it contains a statement as to experience in industrial relations, from that point of view also.
…..For all those reasons we have come to the conclusion that the decision of the Industrial Tribunal cannot be sustained on the first basis on which they put it, namely an express mobility clause. In those circumstances we do not give any ruling on the alternative ways in which Mr Kibling put that first point. He said that the alleged variation of contract would fail for lack of consideration, but there is no need for us to deal with that, since we find that there was no acceptance of the new contract by Mrs Aparau. Further, he said, even if that clause were incorporated it should not, as a matter of construction or by way of implied term, be capable of being used for disciplinary purposes, as he says on the facts was attempted in this case. Again, we need not deal with that because we have found that this was not an express term of the contract. Finally, the last way in which Mr Kibling, by his re-amended Notice of Appeal, sought to attack this finding was to allege that the Tribunal’s finding of fact of the receipt of the terms by Mrs Aparau was perverse, but he abandoned that ground of appeal, and therefore we need not deal with that.
We come therefore to the second way in which the Industrial Tribunal put their decision, that is to say by way of an implied term dating back to the original contract with Bejam Group Plc. We have in mind the classification of implied terms set out in the speech of Lord Wilberforce in the case of Liverpool City Council v Irwin [1977] AC 239. At page 253 Lord Wilberforce said at letter F:
“Where there is, on the face of it, a complete, bilateral contract, the courts are sometimes willing to add terms to it, as implied terms: this is very common in mercantile contracts where there is an established usage: in that case the courts are spelling out what both parties know and would, if asked, unhesitatingly agree to be part of the bargain. In other cases, where there is an apparently complete bargain, the courts are willing to add a term on the ground that without it the contract will not work – this is the case, if not of The Moorcock … itself on its facts, at least of the doctrine of The Moorcock as usually applied. This is, as was pointed out by the majority in the Court of Appeal, a strict test – though the degree of strictness seems to vary with the current legal trend – and I think that they were right not to accept it as applicable here. There is a third variety of implication, that which I think Lord Denning M.R. favours, or at least did favour in this case, and that is the implication of reasonable terms. But though I agree with many of his instances, which in fact fall under one or other of the preceding heads, I cannot go so far to endorse his principle; indeed, it seems to me, with respect, to extend a long, and undesirable, way beyond sound authority.
The present case, in my opinion, represents a fourth category, or I would rather say a fourth shade on a continuous spectrum. The court here is simply concerned to establish what the contract is, the parties not having themselves fully stated the terms. In this sense the court is searching for what must be implied.”
In the case of Jones, to which we have already referred, this Tribunal held that there must necessarily in a contract of employment be some term as to place of work, so that term would fall within Lord Wilberforce’s fourth category. One is not asking whether given an apparently complete contract one should add some term, with the strict test which is required in order to do that. One is looking for what should be the term on a subject which must be covered one way or the other, and if not expressly, it must be covered by implication. Now if there must be a term as to the place of work, that causes no difficulty in a case like the present. It is manifest that the implied term as to place of work is that is shall be the place where the employee is actually working at the time, or about to start work if it is the very beginning of the relationship.
We also agree with the judgment in Jones v Associated Tunnelling Co. Ltd, that in the type of employment which was under consideration there, that is to say working for contractors who, among other things, were carrying out specialist tunnelling and bunkering work at National Coal Board Collieries, there must also be some implied term as to mobility, because the nature of the work was such that it was certainly not guaranteed to, and very probably would not, continue indefinitely at the same place. Another example often cited in the authorities is that for instance of a steel erector. Here there was no necessity for such a term, and in our view it should therefore be implied only if the stricter test appropriate to such circumstances is satisfied. The Industrial Tribunal seem indeed to have had that test in mind, in the way in which they put the question in paragraph 12, where they say that if the employers had said to Mrs Aparau that it might be necessary, she would have said “of course”. That is not exactly the way in which the traditional test is put in The Moorcock, but it plainly has that sort of approach in mind. If that is the correct test, then we for our part are quite clear that the answer given by the Industrial Tribunal is incorrect. If this was a term not necessitated by the express terms, or by the nature of the relationship, in the sense that it would be necessitated by the nature of a steel erector’s contract, then we see no reason at all why Mrs Aparau should simply have said “of course” if the question of such a clause had been raised. Nor, to put the test in another way, do we see any reason for implying such a term in order to give business efficacy to the contract. Of course, it is an advantage to employers of assistants in large chains of stores to be able to move employees around, but it plainly is not a necessity; there are all sorts of ways of dealing with obtaining the necessary flexibility of employment, without having to have resort to a compulsory right to transfer, and on that way of putting the test we see no reason why this term had to be implied.
If we are wrong about that and the correct conclusion is that some term as to mobility must be implied in every contract of employment, then first that does not of course necessitate that such a term will always give the employer the right to move the employee. The term as to mobility may simply be that the employee is entitled to remain at the particular work place. For that reason the distinction between the necessity of having some term as to mobility and not is rather an unreal one, because it is a distinction between silence as implying no right to transfer and an express provision against transfer, which may not be very common. However, if that is the way in which the matter should be approached, Mr Glennie relies on the case of Courtaulds Northern Spinning Ltd v Sibson [1988] ICR 451 which was also cited to the Industrial Tribunal, for the proposition that the test in that case is simply, and this comes at page 460G, as being:
“… The court merely has to be satisfied that the implied terms one which the parties would probably have agreed if they were being reasonable.”
And in that passage Slade LJ in his judgment, it appears, contrasts that test with the test of the court having to be satisfied that the parties, if asked, would in fact have agreed the term before entering into the contract.
We are not at all clear how that test as formulated by Slade LJ, in Courtaulds, is to be reconciled with what the House of Lords said in Liverpool City Council v Irwin, where for instance Lord Wilberforce at page 254 F in his speech said:
” My Lords, in order to be able to choose between these, it is necessary to define what test is to be applied, and I do not find this difficult. In my opinion such obligation should be read into the contract as the nature of the contract itself implicitly requires, no more, no less: a test, in other words, of necessity.”
However, assuming in the respondents’ favour that the Courtaulds test is correct and that we must therefore on this assumption ask ourselves what term the parties would have agreed if they were reasonable, we are clear that on that basis also no term entitling the respondents to transfer Mrs Aparau against her will should be implied. The facts of the present case are very different from those of Jones v Associated Tunnelling Co. Ltd, where such a term was implied, and the nature of the employment there I have already described. They are also different from those in the case of Courtaulds v Sibson itself, where the employee was a lorry driver working out of a particular transport depot, but of course in the course of his employment driving substantial distances. It is noteworthy in the Courtaulds case that despite the conclusion that a mobility clause was properly to be implied there the judgement of Slade LJ, with whom the other members of the Court of Appeal agreed, contained this sentence at page 461 H, after dealing with the circumstances of the employees job in that case:
“Though constant reference has been made in the course of argument to Greengate as the employee’s “place of work”, it was in truth no more than a starting and finishing place for his work shifts – … The present case is quite different, for example, from that of a shop assistant whose place of work will ordinarily be a particular shop in a particular locality throughout the working day.”
That of course, again, is obiter, but it is striking that the counter-example which the Court of Appeal chooses to give in the very case in which it is coming to the conclusion that an implied mobility clause arose is the example of a shop assistant.
We do not therefore consider that the decision of the Industrial Tribunal can be sustained on this ground either, and to summarise: our first reason is that there was no necessity to have any clause in such a contract about mobility and secondly, if we are wrong about that, and some clause must be implied, there was no necessity or no ground for supposing that the parties, being reasonable, would both have agreed that it should give the employer the right to move Mrs Aparau at the employer’s will.
That brings us therefore to the third basis on which the Industrial Tribunal put its decision, that if there was no express or implied mobility clause, nevertheless what must in those circumstances be a breach on the part of the respondents in instructing Mrs Aparau to move was not a fundamental breach or, to put it more accurately, not a repudiatory breach entitling her to treat herself as having been constructively dismissed.
In our view that ground cannot be sustained either. The specific finding which the Industrial Tribunal made, and which plainly is a significant and material part of their reasoning in reaching that conclusion, is that there was an offer by the employers to re-imburse the additional travelling expenses which Mrs Aparau would have incurred in working at East Finchley. Mr Kibling says, and Mr Glennie does not dispute this, that there is simply no note of any evidence to that effect. In those circumstances we really see no justification for assuming that there was some unrecorded evidence covering the point, so for that reason alone we would reject this ground, for the reason that there was no evidence to found the Industrial Tribunal’s conclusion.
But we also consider it wrong on a more general level, because for an employer to give a summary instruction to an employee to change the employee’s place of work, when there is no term entitling the employer to give such an instruction, must in our view be a prime example of a repudiatory breach. It would require the most extreme circumstances to take it out of that category. Mr Glennie said: what if the employers had moved their shop from number 47 The High Street to number 48? Well, it may well be that in those circumstances the situation would be different, but this is far from being that sort of case, this was a case where an employee was working at one branch, that that branch was to continue in existence, and that she was being told to go to work at another branch at a very significant distance away, not of course one which required her to move house or anything of that kind, but nevertheless one which made a significant difference in her pattern of life. We see no way in which that can be found to be other than a repudiatory breach of contract.
For those reasons, therefore, we consider that the Industrial Tribunal’s decision was wrong in law on each of the three grounds on which it was based. We have not been addressed as to whether, in those circumstances, we are in a position to substitute a conclusion of our own or whether, as would be the normal course of events, the matter must be remitted for a further hearing. We take it that if it were remitted it would have to be for a complete re-hearing before a different Tribunal; it does not seem possible to separate particular findings that could stand and leave the rest to be dealt with afresh.”
Dryden v Greater Glasgow Health Board
[1992] IRLR 469
Lord Coulsfield Employment Appeal Tribunal
“ The appellant’s contract of employment is a standard form document, which does not contain any express clause relevant to the present issue. The contract does contain reference to Whitley Council Agreements as determining levels of wages and other matters, but again there does not appear to have been any relevant decision or agreement to be found in that source. The Industrial Tribunal have found that it is the practice in the Health Service for conditions of employment and wages to be discussed with trade unions and professional organisations, the agreements being incorporated in the contracts of employment of the employees. They have also found that, at the Health Board level, proposed policies, changes in operational practices, and working rules, are negotiated with trade unions by means of regular meetings of a joint consultation committee and a joint trade union committee. It does not appear that there was any relevant agreement so negotiated.
The principal submissions on behalf of the appellant, both before the Industrial Tribunal and before us, were based on the obligation of the employer not to prevent the employee from performing her part of the contract and not to act so as to destroy the trust and confidence between employer and employee. Before turning to these contentions, however, we should first deal with the question whether the contract contained any specific implied term related to smoking, a matter in respect of which we were left in some uncertainty about the appellant’s position. It is, we think, obvious that if there was a term in the appellant’s contract of employment to the effect that she would be entitled to have access to facilities for smoking during working hours, the respondents would not be entitled to vary that term unilaterally, and it is possible that an attempt to do so might be held to amount to a sufficient breach of contract to entitle the employee to resign. In his submissions to us, Mr Miller, who appeared for the appellant, referred to Watson v Cooke, Webb and Holton COIT 13852/84, in which an Industrial Tribunal held that an employer who introduced a ban on smoking committed a breach of contract in that he introduced, or sought to introduce, a wholly new contractual term. He also referred to another Industrial Tribunal decision, Rogers v Wicks & Wilson Ltd COIT 22890/87, in which the Tribunal preferred to treat a ban on smoking as a matter of rules of the place of work rather than as a term of the contract. Mr Miller submitted to us that it would be safer to approach the problem by considering the employer’s conduct, rather than by considering whether there was an implied term relating to smoking. At another point in his submissions, however, he suggested that there was an implied term that smoking would be permitted, because custom and practice permitted it, and that the cancellation of that permission was repudiatory. We were therefore left in some doubt whether or not it was suggested that there was a specific term relating to a “right to smoke” in the appellant’s contract. The Industrial Tribunal in this case may have suffered from the same difficulty. They record that there was reference to the two Industrial Tribunal cases cited above, that it was submitted that it was not useful to consider whether the appellant had an implied contractual right to smoke at work, and that there was no submission that the right to smoke at work was an essential term of the contract. They also record that, in her evidence, the appellant agreed that the limited ‘no smoking’ ban was a matter of rules. They do, however, then go on to consider whether there was an implied term, to refer to the well-known authorities which define the circumstances in which a term can be held to be implied, and to hold that smoking is in a different category from, and falls far short of, the kind of custom which has been held to be implied in a contract of employment. They also hold that such a term could not be said to be necessary to give business efficacy to the contract, to give effect to the combined intention of the parties or to complete their contractual arrangements.
The question whether an employer is entitled to prohibit or restrict smoking in the workplace is one which is likely to arise in a number of different contexts, and it is tempting to try to arrive at some general answer to the question whether there may be an implied contractual term which confers a “right to smoke” on the employee. We think, however, that that temptation should be resisted. The question whether a term should be implied in a particular contract is one dependent on the particular facts and circumstances, and, while we think that there is much force in the reasoning of the Industrial Tribunal, it seems to us that they went further than is necessary for the decision of this case. It is sufficient, in our opinion, to say that the findings of fact and submissions before us form an entirely inadequate basis for holding that there was any implied contract term to the effect that smoking would, to some extent or in some way, continue to be permitted, either generally or in the particular case of the appellant. Neither before us, nor, it appears, before the Industrial Tribunal, was there any real attempt to present an argument for the existence of an implied term related to the well-established tests which have to be applied in order to determine whether or not such a term should be held to form part of a contract, nor was there any real attempt to lead evidence to establish the facts necessary to found such an argument.”
D v. Great Southern Hotels Ltd.
[2001] IEHC 115
Mr. Justice McCracken
“THE DEFENDANT’S CASE.
22. The Defendant’s primary case is that on the facts the Plaintiff disobeyed a direct instruction from a superior, and this in itself merits instant dismissal. In this regard reference is made to Pepper -v- Webb (1969) 2 ALL E.R. 216 where a gardener refused to obey his employers instructions in relation to certain plants, and it was held that this, coupled with insolent remarks by the Plaintiff justified instant dismissal. This case was approved of by Hamilton J. as he then was in an unreported judgment of 8th February, 1978 in the case of Brewster -v- Burke & Anor . The Defendant further argues that even if instant dismissal was not justified, there clearly was good and sufficient reason in the circumstances of the present case to give notice to the Plaintiff, taking into account the poor performance of the hotel under his management, the specific incident with Ms. Hickey and the Plaintiff’s subsequent attitude. They point out that, by the time the Plaintiff was actually dismissed, all trust and confidence between the Plaintiff and the Defendant had disappeared and it would be impossible to continue the Plaintiff’s employment under those circumstances. They contend that this in itself constitutes good and sufficient reason to terminate the employment.
THE LAW.
23. I have already referred to Pepper -v- Webb and Brewster -v- Burke. I would point out that both those cases were decided over twenty years ago, and it could certainly be argued that they do not represent the law as of today. Employment law has developed very considerably over those years.
24. There is no doubt that some at least of the principles of natural justice must apply to a situation where an employee is being dismissed for misconduct. In Glover -v- BLN Limited [1973] I.R. 388 Walsh J. said at p. 425:-
“The Plaintiff was neither told of the charges against him nor was he given any opportunity of dealing with them before the Board of Directors arrived at its decision to dismiss him. In my view this procedure was a breach of the implied term of the contract that the procedure should be fair, as it cannot be disputed, in the light of so much authority on the point, that failure to allow a person to meet the charges against him and to afford him an adequate opportunity of answering them is a violation of an obligation to proceed fairly.”
25. In the present case there was no procedure laid down for the conduct of any disciplinary procedures against the Plaintiff, although there were quite detailed procedures in relation to more junior members of the staff. That situation was addressed by the Supreme Court in Mooney -v- An Post [1998] ELR 238, where Barrington J. giving the Judgment of the Court said at p. 247:-
“If the contract or the statute governing a person’s employment contains a procedure whereby the employment may be terminated it usually will be sufficient for the employer to show that he has complied with this procedure. If the contract or the statute contains a provision whereby an employee is entitled to a hearing before an independent board or arbitrator before he can be dismissed then clearly that independent board or arbitrator must conduct the relevant proceedings with due respect to the principles of natural and constitutional justice. If however the contract (or the statute) provides that the employee may be dismissed for misconduct without specifying any procedure to be followed the position may be more difficult. Certainly the employee is entitled to the benefit of fair procedures but what these demand will depend upon the terms of his employment and the circumstances surrounding his proposed dismissal. Certainly the minimum he is entitled to is to be informed of the charge against him and to be given an opportunity to answer it and to make submissions.”
26. Finally, there is authority that a claim that employment is permanent in the sense of being continuous for life or until a pensionable age is not sustainable at common law and that in those circumstances the Plaintiff’s employment is permanent only in the sense of being for an indefinite period terminable by reasonable notice. Walsh -v- Dublin Health Board 98 ILTR 82.
CONCLUSIONS.
27. While the Plaintiff’s contract is a somewhat unusual one in relation to its termination, I have very little doubt as to its true construction. I do not think that this was ever intended to be a contractually binding contract of employment until the Plaintiff reached the age of 65, particularly in the light of the commencement of the relevant clause with the words “it is intended that”. In my view this was a contract which could be terminated on reasonable notice by either party at any time. The contract then provides that it may be determined on six months notice “for good and sufficient reason”. I think this phrase is of considerable importance, as it does not in my view either expressly or impliedly limit the right to give notice to cases where there has been some form of misconduct. I think, had that been intended, it would have been very clearly stated. Accordingly, in my view this contract may be determined by six months notice for any good and sufficient reason, whether it be related to the Plaintiff’s misconduct or to the general relationship between the parties. I also am quite satisfied that, like most contracts of employment, there is an implied condition that the contract may be determined without notice for serious misconduct.
28. The question then arises as to whether there was serious misconduct in the present case. I am satisfied on the evidence that the Plaintiff was either given a specific order or at least there was an agreement between himself and his superior officer, namely Mary McKeon, that he would personally approach Ms. Hickey, would seek to find out from her the reasons for her letter of resignation and would seek to persuade her to remain in the Defendant’s employment. I am further satisfied he did not do this, and that he told Mary McKeon he had done so. I think it matters little whether this was an express instruction or a course of action which he undertook to his superior to carry out. He certainly lied to her about it and this is a very serious matter. It should be noted that the Defendant does not rely solely on this episode as grounds for dismissal, in that it also points to the Plaintiff’s attitude in the days following the incident, in which he showed little or no co-operation with the Defendant, and were it not for the fact that this was clearly done on his solicitors advice, I would treat it as a most serious matter. I do not think any of the other matters which were ultimately taken into account by the Defendant could conceivably justify immediate dismissal, and I therefore would propose only to consider the Plaintiff’s behaviour in the relevant incident in this regard. I have considered the statements set forth in Pepper -v- Webb but on balance I do not think that they apply to the present case. The Plaintiff here was a senior employee, and, as is shown by the fact that the disciplinary procedures agreed by the company with the trade unions did not apply to him, I think he deserved to be treated slightly differently from the average employee. While what took place between the 12th and 15th January undoubtedly was misconduct on his part, I do not think in the circumstances of the present case that it was sufficient misconduct to justify instant dismissal. I think I should also say in fairness to the Plaintiff that I think the Defendant’s handling of the subsequent disciplinary proceedings was unnecessarily heavy handed, and both parties were to blame for the subsequent deterioration of relations.
29. Having said all of that, however, I am quite satisfied that the totality of matters complained of against the Plaintiff did constitute good and sufficient reason to terminate his employment. The results of the hotel had been bad for several years, I am satisfied that the Plaintiff had been made aware of the disquiet of the Defendant as to his management of the hotel, and I am also satisfied that he was well aware of the importance of the employment of Ms. Hickey in turning around the results. I do not know why he pursued the course he did on 12th January, but it was clearly a serious breach of his obligations to the Defendant, which was compounded by his telling lies afterwards. In addition, all normal relations between the Plaintiff and his superiors in the Defendant had disappeared to the extent that it would have been virtually impossible for them to have worked together. I am satisfied that the Defendant was perfectly entitled to serve notice on the Plaintiff pursuant to the relevant clause in his contract of employment on the basis there was good and sufficient reason to terminate it.
30. The only other matter to be considered is whether fair procedures were observed in the Defendant’s dealing with the Plaintiff. Apart from earlier discussions about his management and about Ms. Hickey, the Plaintiff was given a four page document setting out a number of complaints against him. He had that document for ten days and obtained legal advice on it. He was invited to, and did, attend a meeting with his legal advisor present. He was asked to explain the matters complained of in the memorandum and was given ample opportunity to do so, which he declined. He was offered a further meeting should he wish it, and was informed that he could appeal any decision made.
31. He complains that at the meeting he had asked for certain financial records to be produced, but in my view this could not be a valid complaint as he must have been well aware of the financial records of the hotel himself. He complains that he asked that Ms. Hickey and Mr. McDonald be present to give their account of what had happened in relation to the two incidents complained of. However, he had had the letter of complaint for ten days before the meeting and did not make this request until he was actually present at the meeting. He complains that Eamon McKeon was effectively the decision maker, and was also one of the complainants. There might be some merit in this complaint were it not for the fact that he was offered an appeal, and did not even respond, and indeed gave evidence that immediately after the meeting on 5th February he had decided to issue these proceedings.
32. For these reasons I am quite satisfied that there was good and sufficient reason to terminate his employment, but he was not given the requisite six months notice. This was undoubtedly a breach of his contract, but one which in my view only entitles him to damages amounting to six months gross salary. As he was entitled to notice under the express contractual provision, in my view the six months gross salary must include all benefits, which I understand amounts to the sum of £29,752.00. The Plaintiff has also claimed general damages and has produced evidence of medical treatment for an episode of depression after the termination of his agreement. Somewhat reluctantly, I would accept that the Defendant did not follow the proper procedures in terminating the contract, as they did not purport to use the contractual provision that they were terminating for good and sufficient reason, but rather purported to terminate his employment on the basis there had been serious or gross misconduct. I would accept that this did cause some distress to the Plaintiff and that it probably was the cause of some short term depression, but in view of the fact that the Defendant was entitled to determine on six months notice I think this can have caused very little specific damage to the Plaintiff. I would be prepared to award him a further £2,000.00 in general damages. Accordingly, there will be a decree for £31,752.00, but of course credit must then be given for all monies which have been paid to the Plaintiff since the termination of his contract.”
H & Anor -v- Bank of Ireland & Anor
[2013] IEHC 6
O’Keeffe J.
Dismissal
“535. The plaintiff’s case, insofar as the termination of his employment is concerned, appears to be:-
1. that his dismissal resulted from a flawed disciplinary process that was part of an unlawful malicious conspiracy to which the person who conducted the inquiry was a party
2. That consequently, by definition, his dismissal was in breach of fair procedures.
3. That, even if there was no conspiracy, there was a breach of fair procedures such as to render his dismissal unlawful
536. The plaintiff’s written submission appear to rely upon a concept of wrongful dismissal that is much wider than the action for wrongful dismissal that is recognized in law. At common law the action for wrongful dismissal lies where a contract of employment is terminated without reasonable notice. Quite separately from the action for wrongful dismissal, in the case of a dismissal for misconduct, the Court has a jurisdiction to intervene if there has been a breach of fair procedures. The plaintiff’s claim in these proceedings is not a wrongful dismissal action for failure to give reasonable notice.
537. It is the defendant’s case that, as a matter of law, the Court does not have any jurisdiction to intervene in relation to the termination of the plaintiff’s employment unless it reaches a finding of a breach of the rules of natural justice, either on the basis of the existence of a conspiracy or otherwise.
538. The law in relation to wrongful dismissal is that, absent express provisions to the contrary, employment contracts can be terminated by notice for good reason, bad reason or no reason. In Sheey v. Ryan and Moriarity [2008] 4 IR 258 , Geoghegan J. stated as follows:-
“The judge in fact went on to point out that the plaintiff had chosen a common law remedy. She could have initiated proceedings under the Unfair Dismissals Act 1967 or under the Redundancy Payments Act. The trial judge then said that the position at common law is that an employer is entitled to dismiss an employee for any reason or no reason on giving reasonable notice. I would slightly qualify that by saying that it does depend on the contract but in the absence of clear terms to the contrary which are unambiguous and unequivocal, that clearly is the position.”
539. A similar view was expressed in England in R v. Hull University [1999] 4 All ER 747 where Donaldson L.J. put it in the following terms:-
“In the ordinary course of events the legal relationship of employer and employee, which is the relationship with which we are concerned, can be determined by either party with or without notice and with or without “good” or any cause. It is a personal relationship and cannot survive its repudiation by either party whether or not the repudiation is accepted by the other. The relationship having ended, all that remains is to determine whether it was wrongful dismissal, which turns on the terms of the contract, or was an unfair dismissal, which turns on the provisions of the relevant English statute.”
540. The Courts are unwilling to extend the common law remedies available in wrongful dismissal in circumstances where the Oireachtas has created an entirely stand alone regime of unfair dismissal. The leading case in this area in England Johnson v. Unysis [2001] ICR 480 sets out the principles. In that case the employee claimed common law damages for breach of the implied term of trust and confidence in an employment relationship. He alleged that, because of the manner in which he had been dismissed, he had suffered a mental breakdown and was unable to work. His claim was struck out as disclosing no reasonable cause of action. The principle annunciated in Johnson is that the implied term of trust and confidence cannot be extended to allow an employee to seek to recover damages for loss arising from the manner of his dismissal. In that case the English Court was unwilling to in effect create a new common law right governing the same ground as that provided under the English statutory scheme similar to that applying in this jurisdiction under the Unfair Dismissals Act. Nicholls LJ. stated that it:-
“…would fly in the face of the limits Parliament has already prescribed on matters such as the classes of employees who have the benefit of the statutory right, the amount of compensation payable and the short time limits for making claims.”
541. What has become known as the Johnson exclusion area has developed from the decision in Johnson v. Unysis. In essence the Courts recognise that a dismissed employee may be compensated for damage caused to him (including personal injury) where the wrong occurred prior to the dismissal. The extent of that exclusion area was considered in Eastwood v. Magnox Electric Plc [2004] IRLR 733 where Nicholls LJ. made the following observations:-
“27. Identifying the boundary of the ‘Johnson exclusion area’, as it has been called, is comparatively straightforward. The statutory code provides remedies for infringement of the statutory right not to be dismissed unfairly. An employee’s remedy for unfair dismissal, whether actual or constructive, is the remedy provided by statute. If before his dismissal, whether actual or constructive, an employee has acquired a cause of action at law, for breach of contract or otherwise, that cause of action remains unimpaired by his subsequent unfair dismissal and the statutory rights flowing therefrom. By definition, in law such a cause of action exists independently of the dismissal.
28. In the ordinary course, suspension apart, an employer’s failure to act fairly in the steps leading to dismissal does not of itself cause the employee financial loss. The loss arises when the employee is dismissed and it arises by reason of his dismissal. Then the resultant claim for loss falls squarely within the Johnson exclusion area.”
542. In the instant case the plaintiff determined, as did the plaintiff in Sheey v. Ryan, to launch his action at common law rather than taking a claim pursuant to the statutory provisions. By doing so he limited his remedies and in particular he cannot ask this Court to act as some type of employment appeals tribunal to determine the fairness of the substantive grounds justifying his dismissal.
543. In Maha Lingam v. HSE [2006] ELR 137, Fennelly J. giving the Judgment for the Court stated as follows:-
“the employer was entitled to give that notice so long as he complied with the contractual obligation of reasonable notice whether he had good reason or bad for doing it. That is the common law position and it is an entirely different matter as to whether a person has been unfairly dismissed and a different scheme of statutory remedy is available to any person dismissed whether with or without notice under the Unfair Dismissals Act, but this is not such an application. This is an action brought at common law for wrongful dismissal in the context of which an injunction was sought.”
544. In McGrath v. Trintech Technologies Ltd and Trintech Group Plc [2005] 16 ELR 49, Laffoy J, at p.391 stated as follows:-
“The first point to be made in relation to that submission is that the plaintiff has not invoked any statutory provision in support of his claim. Although decisions of the Employment Appeals Tribunal were cited, I did not understand the plaintiff to argue that the principles applicable under the statutory scheme should be imported into common law. On the authority of the judgment of Carroll J. in Orr v. Zomax Ltd. [2004] IEHC 131, [2004] 1 IR 486, it would not have been open to them to do so. His claim is grounded entirely in the common law – in contract and tort. In particular his claims for declaratory relief are based on the express or implied terms which he contends for, not on any statutory protection. On the authority of the decision of the Supreme Court in Parsons v. Iarnród Éireann [1997] 2 I.R. 523, however, the plaintiff is not entitled to any declaration which extends beyond the ambit of the contractual rights which he establishes and the breach of those rights. On the same authority, the only other remedy to which he is entitled, if he establishes his claim in contract, is damages.”
545. Prior to her making that observation Laffoy J. expressly referred to Sheehy v. Ryan, Hickey v. The Eastern Health Board, Johnson v. Unysis Ltd and Malik v. BCCI. This matter was also referred to in some detail by Clarke J. in Carroll v. Bus Atha Cliath [2005] 4 IR 184. At page 208 of the Judgment he stated as follows:-
“It is, of course, the case that Parsons v. Iarnród Éireann [1997] 2 I.R. 523 was concerned with dismissal rather than with breaches of terms of an employee’s contract of employment. However, it does appear to be a recent reiteration of the general principle of law to the effect that a court will not grant orders which have, in substance, the effect of ordering specific performance of a contract of employment. In Cassidy v. Shannon Castle Banquets [2000] E.L.R. 248 Budd J. granted a declaration that a purported dismissal was in breach of natural and constitutional justice and that, as a consequence, the dismissal was without efficacy and invalid. However it is made clear that the above declarations did not coerce a reinstatement. In that respect Parsons v. Iarnród Éireann [1997] 2 I.R. 523 was distinguished. It is also clear from a consideration of the judgment of Budd J. in Cassidy v. Shannon Castle Banquets [2000] E.L.R. 248 that a factor taken into account in that case was the entitlement of the plaintiff to clear his name. In that respect it is of some importance to note that there have been significant developments in the typical terms of employment of many employees in recent years. Such changes have a material effect upon the circumstances in which, as a matter of contract, many employees can be dismissed.
The traditional position at common law was that a contract of employment could be terminated on reasonable notice without giving any reason. In those circumstances it was obvious that the only remedy for a breach of contract by way of dismissal was for the payment of the amount that would have been earned had appropriate notice been given. However, it is now frequently the case that employees cannot be dismissed, as a matter of contract, save for good reason such as incapacity, stated misbehaviour, redundancy or the like. It would appear that the development of the law in relation to affording employees a certain compliance with the rules of natural justice in respect of possible dismissal derives, at least in material part, from this development. If the stated reason for seeking to dismiss an employee is an allegation of misconduct then the courts have, consistently, held that there is an obligation to afford that employee fair procedures in respect of any determination leading to such a dismissal. That does not alter the fact that an employer may still, if he is contractually free so to do, dismiss an employee for no reason. It simply means that where an employer is obliged to rely upon stated misconduct for a dismissal or, where not so obliged chooses to rely upon stated misconduct, the employer concerned is obliged to conduct the process leading to a determination as to whether there was such misconduct in accordance with many of the principles of natural justice.
In those circumstances it seems to me that it is open to the court to grant declarations concerning most alleged breaches by an employer of his contractual obligations. Parsons v. Iarnród Éireann [1997] 2 I.R. 523 imposes a limit in cases where the declaration could not avail the plaintiff in any practical way.
Where, as here, the consequence of a declaration as to a breach in respect of the plaintiff’s entitlement to date simply gives rise to a claim in damages then no difficulty, therefore, arises.”
546. In Nolan v. Emo Oil Services Ltd [2009] IEHC 15 Laffoy J. dealt expressly with an attempt by a plaintiff to litigate what was in truth an unfair dismissal claim that is an allegation that he was either unfairly selected for redundancy or alternatively the grounds for his dismissal was not in truth redundancy. She described the plaintiff’s claim in the following terms:-
“Although not articulated in this way by counsel for the plaintiff, the plaintiff’s case, as I understand it, is that it is an implied term of his contract of employment that, notwithstanding the express right to terminate his contract on notice, the plaintiff is entitled to litigate the fairness or otherwise of the termination of his contract on the grounds of redundancy by reference to the statutory code in plenary proceedings in this Court. I base that understanding on the submission of counsel for the plaintiff that the defendant, as his employer, owed a duty of good faith to the plaintiff, in consequence of which it was an implied term of the plaintiff’s contract of employment that, if he was to be let go on the grounds of redundancy, there would have to be a valid redundancy.”
547. Laffoy J. then went on to make reference to the Supreme Court decision in Maha Lingam and noted that in that case the Supreme Court had made reference to Eastwood, a case in which the House of Lords had considered its earlier decision in Johnson v. Unysis Ltd. She then quoted from Lord Nichols and his views on the “Johnson exclusion area” and she then dealt with the case at issue in the following terms:-
“In this case, the plaintiff’s employment with the defendant came to an end on 30th November, 2008 and his last day at work was the 28th November, 2008. In essence, what he is trying to achieve by these proceedings is to get his job back. He got the required notice under his contract of employment and his contract of employment was lawfully terminated. If, as he contends, his dismissal was unfair, then the remedy available to him is the remedy provided by statute. As a matter of fact, that is the only remedy he could pursue because, in my view, he had not acquired a cause of action for breach of contract or otherwise prior to his dismissal. In the circumstances, there is no remedy which he can pursue in this Court.
That conclusion is supported by the decisions of the Supreme Court in the Maha Lingham case and in the Sheehy case.
In my view, it is also correct in principle. There may be situations in which, on the reasoning of Lord Nicholls in the Eastwood case, a dismissed employee is entitled to maintain an action at common law, for example, where he has suffered financial loss from psychiatric or other illness as a result of pre-dismissal unfair treatment which would give rise to an action for damages. That scenario was signposted by Lord Steyn in the Johnson case and recognised in the Eastwood case. The plaintiff’s situation here is entirely different. In effect, he is inviting the Court to develop its common law jurisdiction by reference to the statutory concepts of redundancy and unfair dismissal. Specifically, the Court was invited by counsel for the plaintiff to have regard to the statutory definition of “redundancy” in s. 7 of the Redundancy Payments Act 1967, as amended. The Oireachtas in enacting the Unfair Dismissal Acts 1977 to 2008 and introducing the concept of unfair dismissal provided for specific remedies for unfair dismissal and specific procedures for obtaining such remedies in specific forums, before a Rights Commissioner or the Employment Appeals Tribunal. For the Courts to expand its common law jurisdiction in parallel to the statutory code in relation to unfair dismissal and redundancy would, to adopt Lord Nicholls’s terminology, end up supplanting part of the code.”
548. The above cases from this jurisdiction recite what are the applicable principles to be considered and applied. In the instant case much of what the plaintiff claims relates to the unfairness of the decision to dismiss as distinct from wrongful dismissal and, as such, this Court has no jurisdiction in same.”
Nolan -v- EMO Oil Services Ltd
[2009] IEHC 15
Laffoy J.
The defendant’s argument raises a very basic point. For the reasons set out below, I think it is correct both in principle and in accordance with precedent.
Under Irish law, an employee has two potential avenues to secure redress for dismissal from employment which he contends is contrary to law. One is to bring an action at common law for wrongful dismissal where he contends that the dismissal was in breach of contract or in violation of his constitutional rights. The other is to pursue a claim for unfair dismissal under the Unfair Dismissal Acts 1977 to 2008. That the two avenues are mutually exclusive has been consistently recognised.
In the Maha Lingham case, Fennelly J. recognised the distinction, in outlining the first of a number of “quite obvious legal matters” raised by that case in the following passage:-
“… that according to the ordinary law of employment a contract of employment may be terminated by an employer on giving of reasonable notice of termination and that according to the traditional law at any rate, though perhaps modified to some extent in light of modern developments, according to the traditional interpretation, the employer was entitled to give that notice so long as he complied with the contractual obligation of reasonable notice whether he has good reason or bad for doing it. That is the common law position and it is an entirely different matter as to whether a person has been unfairly dismissed and a different scheme of statutory remedy is available to any person dismissed whether with or without notice under the Unfair Dismissal Act, but this is not such an application. This is an action brought in common law for wrongful dismissal in the context of which an injunction was sought.”
The distinction was reiterated by the Supreme Court in Sheehy v. Ryan [2008] IESC 14 in which judgment was delivered by Geoghegan J. on 9th April, 2008. Referring to the decision of Carroll J. at first instance, Geoghegan J. stated:-
“The judge in fact went on to point out that the appellant had chosen a common law remedy. She could have initiated proceedings under the Unfair Dismissals Act, 1967 or under the Redundancy Payments Act. The trial judge then said that the position at common law is that an employer is entitled to dismiss an employee for any reason or no reason on giving reasonable notice. I would slightly qualify that by saying that it does depend on the contract but in the absence of clear terms to the contrary which are unambiguous and unequivocal, that clearly is the position.”
In both the Maha Lingham case and the Sheehy case no period of notice for termination was stipulated in the relevant contract of employment. In this case, as I have said, it is common case that a period of notice is stipulated and that what was required in September 2008 was four weeks’ notice. The defendant effectively gave the plaintiff three months’ notice. Accordingly, according to what Fennelly J. described as “the traditional law”, the plaintiff’s contract of employment was lawfully terminated. No action for breach of contract arises, nor can any question of violation of the plaintiff’s constitutional rights arise.
It is necessary to consider whether the “modern developments” to which Fennelly J. referred have a bearing on the plaintiff’s entitlement to the relief he claims on this application.
A line of authority has developed in this jurisdiction from the decision of the High Court (Costello J.) in Fennelly v. Assicurazioni Generali Spa. [1985] 3 I.L.T.R. 73, on the basis of which an employee, who has been dismissed, may, in certain circumstances, be granted a mandatory injunction directing payment of his or her salary pending the determination of the substantive proceedings. Counsel for the plaintiff suggested that the decision of the High Court (Keane J.) in Shortt v.Data Packaging Limited [1994] E.L.R. 251, in that line, is authority for the proposition that the plaintiff should be granted a mandatory injunction in this case on the basis of his contention that his redundancy was not valid. A consideration of the judgment of Keane J. does not bear that out. The facts in that case were that in 1988 the plaintiff had been employed as a managing director of the defendant on a three-year fixed term contract which provided that any continuation after the fixed term was to be deemed to be employment of indefinite duration terminable by six months’ notice. The plaintiff continued in employment in accordance with the terms of the contract following the expiration of the three-year term until 11th January, 1994, when he was informed that, owing to a re-structuring of the company, he was to be made redundant, and that the termination of his employment was to be of “immediate effect”. The plaintiff sought an injunction restraining the defendant from appointing any person other than the plaintiff to the position of managing director of the defendant pending the trial and an order that the defendant continue to pay him all salary accruing from 11th January, 1994 and other benefits to the trial of the action. Keane J. in an ex tempore judgment indicated that he would make an order largely in the form of the order made by Costello J. in the Fennelly case on the basis that he was satisfied that the plaintiff had made out a fair issue to be tried as to the legality of the purported termination. He outlined the arguments which had been advanced on behalf of the plaintiff: that the power of immediate termination could only be exercised by the directors of the defendant and that there had been no decision of the directors, because the plaintiff, who was a director, would have been aware of it; that the plaintiff’s removal was ineffective, in that it was in breach of the principles of natural justice; that the alleged redundancy was spurious and unsubstantiated and that the real reason for the purported removal lay in differences between the plaintiff and his employers; and that the statutory redundancy requirements had not been observed.
There are two significant features which distinguish the Shortt case from the plaintiff’s case. First, the plaintiff in the Shortt case was an office holder, as a director, as well as a contract employee. Secondly, the defendant purported to terminate his employment forthwith without giving him the notice to which he was entitled as a matter of contract. In my view, the Shortt case is not authority for the proposition that, in a case in which the plaintiff’s employment has been terminated in accordance with his contract of employment, but on the grounds of redundancy, the High Court in a plenary action, has jurisdiction to consider whether the redundancy was a genuine redundancy and, if it finds that it was not, or that there is a strong case that it was not, to afford relief to the plaintiff either in the substantive action or by way of interlocutory injunction.
In the Maha Lingham case, Fennelly J. considered an argument made on behalf of the plaintiff that there has developed in parallel with the statutory scheme the tendency of the Courts to imply a term of good faith and mutual trust in contracts of employment. Fennelly J. made the following observations on that argument:-
“There has been a discussion of course of the English case of Eastwood v. Magnox Electric Plc., [2004] 3 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 where 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 contracts 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 had 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.”
Having made those remarks, Fennelly J. looked to the facts of the case before him. He reiterated that it was necessary for the plaintiff to establish a strong and clear case. He found that, so far as the defendant was concerned, the plaintiff’s employment as a temporary orthopaedic surgeon was terminated for the simple straight forward reason that the employment was not authorised and was not funded and that there was no question of the dismissal being motivated by any suggestion of racial discrimination or racial slur.
Although not articulated in this way by counsel for the plaintiff, the plaintiff’s case, as I understand it, is that it is an implied term of his contract of employment that, notwithstanding the express right to terminate his contract on notice, the plaintiff is entitled to litigate the fairness or otherwise of the termination of his contract on the grounds of redundancy by reference to the statutory code in plenary proceedings in this Court. I base that understanding on the submission of counsel for the plaintiff that the defendant, as his employer, owed a duty of good faith to the plaintiff, in consequence of which it was an implied term of the plaintiff’s contract of employment that, if he was to be let go on the grounds of redundancy, there would have to be a valid redundancy.
In the Eastwood case referred to by the Supreme Court in the Maha Lingham case, the House of Lords considered its earlier decision in Johnson v. Unisys Limited [2003] 1 A.C. 58. Lord Nicholls in his speech representing the majority view observed (at para. 14):-
“I recognise that, by establishing a statutory code for unfair dismissal, Parliament did not evince an intention to circumscribe an employee’s rights in respect of wrongful dismissal. But Parliament has occupied the field relating to unfair dismissal. It is not for the courts now to expand a common law principle into the same field and produce an inconsistent outcome. To do so would, incidentally, have the ironic consequence that an implied term fashioned by the courts to enable employees to obtain redress under the statutory code would end up supplanting part of that code.”
Later (at para. 27), Lord Nicholls identified the boundary line of what had come to be known as the “Johnson exclusion area”, that is to say, the area within which relief cannot be pursued in the Courts, stating:-
“Identifying the boundary of the ‘Johnson exclusion area’, as it has been called, is comparatively straightforward. The statutory code provides remedies for infringement of the statutory right not to be dismissed unfairly. An employee’s remedy for unfair dismissal, whether actual or constructive, is the remedy provided by statute. If before his dismissal, whether actual or constructive, an employee has acquired a cause of action at law, for breach of contract or otherwise, that cause of action remains unimpaired by his subsequent unfair dismissal and the statutory rights flowing therefrom. By definition in law such a cause of action exists independently of the dismissal.”
In this case, the plaintiff’s employment with the defendant came to an end on 30th November, 2008 and his last day at work was the 28th November, 2008. In essence, what he is trying to achieve by these proceedings is to get his job back. He got the required notice under his contract of employment and his contract of employment was lawfully terminated. If, as he contends, his dismissal was unfair, then the remedy available to him is the remedy provided by statute. As a matter of fact, that is the only remedy he could pursue because, in my view, he had not acquired a cause of action for breach of contract or otherwise prior to his dismissal. In the circumstances, there is no remedy which he can pursue in this Court.
That conclusion is supported by the decisions of the Supreme Court in the Maha Lingham case and in the Sheehy case.
In my view, it is also correct in principle. There may be situations in which, on the reasoning of Lord Nicholls in the Eastwood case, a dismissed employee is entitled to maintain an action at common law, for example, where he has suffered financial loss from psychiatric or other illness as a result of pre-dismissal unfair treatment which would give rise to an action for damages. That scenario was signposted by Lord Steyn in the Johnson case and recognised in the Eastwood case. The plaintiff’s situation here is entirely different. In effect, he is inviting the Court to develop its common law jurisdiction by reference to the statutory concepts of redundancy and unfair dismissal. Specifically, the Court was invited by counsel for the plaintiff to have regard to the statutory definition of “redundancy” in s. 7 of the Redundancy Payments Act 1967, as amended. The Oireachtas in enacting the Unfair Dismissal Acts 1977 to 2008 and in introducing the concept of unfair dismissal provided for specific remedies for unfair dismissal and specific procedures for obtaining such remedies in specific forums, before a Rights Commissioner or the Employment Appeals Tribunal. For the Courts to expand its common law jurisdiction in parallel to the statutory code in relation to unfair dismissal and redundancy would, to adopt Lord Nicholls’s terminology, end up supplanting part of the code.
The defendant, without prejudice to its contention that the plaintiff could not pursue a remedy in this Court, argued that, in any event, the redundancy was a genuine redundancy. Further, it was contended that there was no question of selection of the plaintiff for redundancy from a pool of employees. He was the only one who held the position of Credit Manager and it was that position which was made redundant. Various authorities were relied on by counsel for the defendant in support of those contentions. I do not propose to express any view on those arguments, which, in my view, are for a different forum.
There will be an order dismissing the plaintiff’s application.”
P v. Iarnrod Eireann
[1997] 2 I.R. 530
Barrington J.;
Counsel on behalf of the defendant, submitted that the plaintiff had elected to pursue a remedy under the Unfair Dismissals Act, 1977, and had thereby precluded himself from pursuing a remedy at common law. The remedy for wrongful dismissal at common law was damages. If, and insofar, as the plaintiff was entitled to claim any declarations these could only be in respect of terms expressed or implied in his contract of employment but the contract of employment had itself been terminated by the dismissal and the contract being a contract of service there was no method at common law or at equity whereby the court could reconstitute the contract or order the defendant to take the plaintiff back into its employment. In the circumstances of the present case, counsel claimed there were only two courses open to the plaintiff. One was to sue at common law for damages and the other was to make a claim for unfair dismissal. The plaintiff could not, he submitted, by dropping his claim for damages in the High Court action seek to circumvent the provisions of s. 15, sub-s. 2 of the Act of 1977.
He relied on Glover v. B.L.N. Ltd. [1973] I.R. 388, Goldrick v. Dublin Corporation (Unreported, High Court, Murphy J., 10th November, 1986) and O’Neill v. Iarnrod Eireann [1991] I.L.R.M. 129.
Conclusion
It appears to me that counsel for the defendant is substantially right in his submissions. This is not a case of the ouster of the jurisdiction of the High Court. The jurisdiction of the High Court remains the same. What the Unfair Dismissals Act, 1977, does is to give to the worker, who feels that he has been unfairly dismissed, an additional remedy which may carry with it the very far-reaching relief of reinstatement in his previous employment. It does not limit the worker’s rights; it extends them. At the same time, s. 15 of the Unfair Dismissals Act, 1977, provides that the worker must choose between suing for damages at common law and claiming relief under the new act. Sub-section 2 accordingly provides that if he claims relief under the Act of 1977, he is not entitled to recover damages at common law; while sub-s. 3 provides that where proceedings for damages at common law for wrongful dismissal are initiated by or on behalf of an employee the employee shall not be entitled to redress under the Unfair Dismissals Act, 1977, in respect of the same dismissal.
The traditional relief at common law for unfair dismissal was a claim for damages. The plaintiff may also have been entitled to declarations in certain circumstances, for instance, that there was an implied term in his
contract entitling him to fair procedures before he was dismissed. But such declarations were in aid of his common law remedy and had no independent existence apart from it. If the plaintiff loses his right to sue for damages at common law the heart has gone out of his claim and there is no other free standing relief which he can claim at law or in equity.
Under these circumstances I would dismiss the plaintiff’s appeal.
While it can have no effect on the present claim it is, perhaps, worth noting that s. 15 is amended by s. 10 of the Unfair Dismissals (Amendment) Act, 1993, and that nowadays a worker is not held to have elected between his remedy under the Unfair Dismissals Act and his remedy at common law until a recommendation under the Unfair Dismissals Act has been made by a rights commissioner or until the hearing by a court of proceedings for damages at common law has commenced.”
The State (Daly) v. Minister for Agriculture
[1987] I.R 170.
Barron J.
In The State (McGarrity) v. Deputy Commissioner of the Garda Siochana (1977) 112 I.L.T.R. 25 the validity of a similar certificate was again considered. The matter was heard on affidavit and the averments contained in the affidavit were not contested. The affidavit filed on behalf of the Commissioner showed that the prosecutor had been found to be in breach of discipline on three separate counts arising from one incident which occurred during his probationary two years. It also showed that the Commissioner had fully considered the record of the prosecutor and the reports of various superiors concerning his conduct and efficiency during such probationary period. These reports were discovered but no attempt was made on behalf of the prosecutor to ascertain their contents. D’Arcy J. regarded himself as being confined to deciding whether the Commissioner’s opinion was supported by documentary material, and he held that it was. He appears to have regarded the lack of challenge of this opinion on behalf of the prosecutor as an indication that the material upon which the Deputy Commissioner had acted and which was available to the prosecutor supported this opinion.
In The State (Burke) v. Garvey [1979] I.L.R.M. 232 the Commissioner dispensed with the services of the prosecutor under art. 9 of the relevant regulations. The prosecutor had been found guilty of a breach of discipline during his probationary period. A second alleged breach of discipline during the same period was subject to disciplinary proceedings. These were discontinued and the Commissioner acted on a recommendation from a report of a Chief Superintendent that the appointment of the prosecutor to the gardai should not be confirmed. It was submitted that no such decision could be made in the face of pending disciplinary proceedings. It was held by the Supreme Court that such a decision could be made in such circumstances. The power under art. 9 was exercisable only during the two year period of probation. Accordingly if the Commissioner had waited for the determination of the disciplinary proceedings he might then be unable to exercise such power. It was held by the Supreme Court that the certificate of the Commissioner was valid and that the net question was whether the Commissioner had before him material upon which he was entitled to form the opinion or to consider that the prosecutor was not likely to become an efficient and well-conducted guard.
In none of these cases was any previous notice of the intention to dispense with his services given to the probationer guard nor was he given any opportunity to put forward any case on his own behalf. In each case, the person who made the decision was either shown or deemed to have had before him material which supported such decision. None of these cases deals with the case where the court was not in a position to test whether the material available was capable of supporting the opinion formed.
In Broomfield v. The Minister for Justice (High Court, Costello J., Ex tempore, 10th April, 1981) the plaintiff was on probation as a prison officer in the employment of the State. His services were dispensed with during the period of probation without any notice to him as to the reasons for so doing. It was accordingly submitted on his behalf that the termination of his appointment was invalid. The power to terminate his services was that contained in s. 7 of the Civil Service Regulation Act, 1956, as amended, to which I have already referred. Costello J. took the view that the plaintiff was not entitled to be given the reasons for his dismissal. He said (at p. 5 of a stenographer’s note furnished by counsel of that judgment):
“A person on probation is not in the same position as an officeholder whose probation is ended for the very obvious reason that his employing authority may consider the probationer unsuited for permanent employment and without any specific charge of any acts of misconduct the employing authority keeps to himself the right not to appoint the probationer on a full time basis.”
Whelan v. Minister for Justice
[1991] 2 I.R. 241
Blayney J.
“In addition to relying on this ground, it was also submitted on behalf of the applicant at the hearing that in terminating his services the respondent ought to have observed fair procedures and that this requirement had not been complied with. These were the sole grounds put forward on behalf of the applicant. It was not submitted that there were no facts to support the decision at which the respondent had arrived.
In my opinion the applicant is entitled to have the decision of the Minister quashed on the ground that it was ultra vires.
The applicant obtained discovery against the respondent. One of the documents discovered was a memorandum from RF, an assistant principal officer of the Prisons’ Personnel Section of the Department of Justice. This memorandum is dated the 10th March, 1989, and recommends that the applicant’s services be terminated. An endorsement on the memorandum, dated the 21st March, 1989, and initialled by the then Minister for Justice, shows that this recommendation was accepted and approved by the respondent on that date. But the applicant’s probationary period had terminated one week previously on the 14th March, 1989. Furthermore there is no evidence that prior to that date the respondent was satisfied that the applicant had failed to fulfil the conditions of his probation. I consider that s. 7 of the Civil Service Regulation Act, 1956, as amended by s. 3 of the Civil Service Regulation (Amendment) Act, 1958, requires that the respondent should have been satisfied of the applicant’s failure to fulfil the conditions of his probation during the period of his probation in order to be entitled to exercise the powers given by the section. The relevant part of the section as amended is that “the appropriate authority is, at any time during the civil servant’s probationary period or such (if any) extension thereof as the appropriate authority may from time to time fix, satisfied that he has failed to fulfil the conditions of probation attaching to his probationary position.”
This shows clearly that the appropriate authority, in this case the Minister for Justice, must have been satisfied of the applicant’s failure at some time during his probationary period or during any extension thereof. Counsel on behalf of the respondent accepted that, apart from the extension of one month, there had never been any formal extension of the probationary period by the respondent but he submitted that the probationary period must be deemed to have been extended as the applicant had never been formally appointed. In my opinion the section does not permit of any such construction. The only extension referred to is such “as the appropriate authority may from time to time fix”. So there could be no extension unless the Minister fixed one and it is common case that he did not.
Since the respondent was relying on the terms of s. 7 of the Act of 1956 as amended, as giving him the power to terminate the applicant’s services, and as he cannot bring himself within the section since there is no evidence that he was satisfied during the period of the applicant’s probation that the applicant had failed to fulfil the conditions of his probation, I consider that the decision of the respondent was ultra vires.”
……Such it seems to me would be the position if it depended on the section alone. But there is another very relevant matter that has to be taken into consideration. At the beginning of this judgment I cited the condition in regard to probation subject to which the applicant was appointed. This provides that:
“Should the officer’s services be unsatisfactory, the appointment may be terminated at any time during the period.”
That provision is open to the construction that if the applicant’s services were unsatisfactory it was only during his probationary period that his appointment could be terminated. So while s. 7 does not in my opinion introduce such a strict requirement, it is possible that this provision in the applicant’s conditions does. But having regard to the conclusion I have already come to, it is not necessary for me to determine this issue. Similarly, it is not necessary for me to consider the second ground on which the applicant put his case, namely, that he was entitled to fair procedures and that this requirement was not complied with by the respondent.
The applicant also seeks a declaration that at the conclusion of his probationary period he was an established civil servant in the Department of Justice holding appointment as a Prison Officer in the Prison Service. It seems to me that this must follow having regard to the ground on which I have held that the respondent’s decision to dismiss the applicant must be quashed. Once the
C v. Independent Newspapers (Ireland) Ltd.
[2003] IEHC 67
Mr. Justice Gilligan
“Basis of Assessing Damages
An action for wrongful dismissal is an action for breach of contract: in essence, the breach complained of in such an action is that the plaintiff’s employment has not been terminated in accordance with his/ her contract or, where no such procedures exist, that the contract has not been terminated in accordance with fair procedures and the common law. The normal measure of damages in a wrongful dismissal action is the amount of salary the employee would have earned had he/ she been allowed to remain working for the balance of his contract, or for the period for which notice of termination should have been given in accordance with the contract. The same principle applies where no notice period as such has been incorporated into the contract: in such cases the common law implies a term into the contract that the employee may only be dismissed on giving reasonable notice and damages will be confined to the measure of the salary the plaintiff would have earned for the period of notice found reasonable in all the circumstances by the court. This has been the rule since Addis v. Gramophone Co. Ltd. [1909] AC 488.
However, the plaintiff has also made separate claims for breach of warranty and/ or negligent misrepresentation/ misstatement. The basis of awarding damages in these two contexts differs considerably from the attenuated scope for awarding damages in wrongful dismissal claims per se and is potentially far more remunerative: accordingly, it is necessary to outline the basis upon which the court will award damages in these contexts in some detail.
The common law courts have drawn a firm distinction between contract and tort in terms of awarding damages upon a finding of liability.
In tort, the plaintiff is entitled to be put in the same position, as far as money can do so, as he would have been in had the tort not been committed. This has been established since Livingstone v. Rawyards Coal Co. (1880) 5 App. Cas. 25 at 39, per Lord Blackburn. This principle is the basis of awarding damages in tort in Irish law: subject to the application of the test of remoteness of damages laid down in Hadley v. Baxendale, the general purpose of an award of damages in a tort claim is to place the plaintiff in the same position as they had been before the commission of the tort in question: damages cannot be awarded for loss of bargain. In Foley v. Thermocement Products Ltd. (1954) 90 ILTR 92 at 98, the Supreme Court referred to restitutio in integrum as “the underlying principle by which courts are guided in awarding damages.”
In contract, however, the compensatable wrong consists not in the making but in the breach of the contract and accordingly the plaintiff is entitled to be placed in the position he would have been had the contract been performed. In other words, the plaintiff is entitled to recover damages for loss of bargain.
…..
Reasonable notice
Where a termination procedure has been agreed and incorporated into the contract of employment, the courts are disinclined to substitute their own view of what is otherwise required to lawfully terminate the contract for the agreed termination procedure: accordingly, even where such a termination procedure does not specify that the employee in question may be dismissed on reasonable notice, the courts will not imply a term to this effect into the contract on the basis that the express agreement regarding termination is inconsistent with the implication of any other terms: see Grehan v. North Eastern Health Board [1989] IR 422.
However, in the converse situation- i.e. that where no termination procedure or notice period has been agreed between the parties- the law implies a term into every contract of employment where a notice period has not been expressly stipulated that reasonable notice must be given to terminate the contract. What constitutes “reasonable notice” is a matter of fact for the court to determine in light of all the circumstances. How the court will approach the question of what constitutes “reasonable notice” in any given context was set out by Tucker J in Warren v. Super Drug Markets Ltd. (1965) 54 DLR (2d) 183 as follows:
“The rules for determining what is a reasonable notice were set out by the full court in Speakman v. Calgary (City) (1908) 9 WLR 264, at 265, 1 Alta LIZ 454, by Beck, J. … viz.:
`… the question, what is a reasonable notice, depends upon the capacity in which the employee is engaged, the general standing in the community of the class of persons, having regard to their profession, to which the employee belongs, the probable facility or difficulty the employee would have in procuring other employment in case of dismissal, having regard to the demand for persons of that profession, and the general character of the services which the engagement contemplates.”
The plaintiff and defendant have cited a significant number of cases in Irish and English law concerning newspaper employees. However (leaving aside those employees whose terms and conditions of employment are dealt with under statute or where a termination procedure and notice period have been agreed and incorporated into a contract) no profession, job or category of employee is treated differently or favourably in the context of the rules used in determining what a reasonable notice period is: the cases are merely specific illustrations of generally applicable rules.
One common thread running through the cases is that “persons in well paid and prestigious jobs are entitled to relatively lengthy notices.” (Forde, Employment Law (2nd edition, p.166). In Lyons v. M.F. Kent & Co. (International) Ltd [1996] ELR 103, an accountant employed by a large construction company who spent much of his time on foreign assignment was held entitled to one year’s notice. In McDonald v. Minister for Education [1940] IR 316, a teacher was held entitled to six months’ notice. It seems the status and position of the employee in question has been the most significant factor in deciding notice entitlements in recent Irish case law. Among the most significant examples of such are: Carvill v. Irish Industrial Bank [1968] IR 325 (where a managing director of a small bank was held entitled to one years’ notice); Tierney v. Irish Meat Packers (1989) ILT 5 (where a group credit controller of a meat company was held entitled to six months notice); Robinson v. Corneil (unreported, High Court, Keane J, 10th April 1992) (where the responsibilities attached to a managerial position were held to justify six months’ notice).
Of interest in the context of the plaintiff’s situation in this case is Lowe v. Walter (1892) 8 TLR 358, which offers the nearest analogy to the plaintiff’s own situation in terms of the position of the person whose notice entitlements were being decided. The foreign correspondent to the Times was held to be entitled to six months’ notice.
A typical example of the length of period the courts are inclined to stipulate for positions of responsibility in the print media is Bowman v. Holten Press Ltd. [1952] 2 All ER 1121. A journalist and photographer were held entitled to six months. Much of the report of the case was taken up with the question of whether the plaintiff was employed under a contract of service or a contract for services and there is no guidance on the issue of reasonable notice: the report briefly recounts how, after finding that the plaintiff was employed under a contract of service the court determined that a reasonable notice period was six months and held that giving the plaintiff two week’s notice to leave was a breach of contract. However, it seems that this decision was based upon the status of the employee more than any other factor.
A good illustration of the relevance of the responsibilities of a position to the question of entitlement to reasonable notice is O’Reilly v. Irish Press (1937) 71 ILTR 194. The plaintiff was the chief subeditor of the Irish Press. He failed to prove a wage custom entitling him to six months’ notice, but the court gave him six months based on the responsibilities attaching to his role: the Court noted that on the evidence before it the success or failure of a newspaper depends to a great extent upon the competence, judgment and the taste of the chief subeditor. The plaintiff had 15 subeditors below him and in addition to being chief subeditor, the plaintiff was the night editor.
It seems proof of a custom regarding notice periods in a particular industry or sector is a significant factor for the court to weigh in deciding the matter and will appreciably influence the court’s thought processes: a reading of some of the cases on reasonable notice suggests that customs prevalent in the industry were of central significance to the court’s decision. However, the customs of a particular industry, if such are proved to exist upon the evidence, will not be decisive of the question of what amounts to reasonable notice: it is but one of the factors identified in Warren v. Superdrug Markets Ltd. to be taken into account in assessing the circumstances of the plaintiff’s employment and the notice period that such circumstances warrant.
One case where a custom of the particular industry proved significant in the court’s decision as to reasonable notice is O’Connell v. The Gaelic Echo Ltd. (1958) 92 ILTR 156. A member of the editorial staff of a monthly magazine was held to be entitled to at least one month’s notice and evidence was given on behalf of the plaintiff by a representative of the NUJ that the customary period for notice in the absence of express agreement in the Dublin area was one month for reporters, three months for sub-editors and six months for chief sub-editor. Another case emphasising the importance of custom is George Edwardes (Daly’s Theatre) Ltd. v. Comber (1926) 42 TLR 247. In that case, an actor had an option agreement with Daly’s theatre whereby the theatre could require the actor to play the part of the Ambassador in the play Katja the Dancer in a West End theatre by giving the actor two weeks’ notice before the end of the season. The option was duly exercised, and the concluded agreement contained a clause that the actor would not perform for any other company or production for the run of the play. The actor subsequently tried to take up an acting engagement with another company before the end of the play’s run. An application by the plaintiff theatre company to restrain the defendant actor from taking this offer up was successful: the court rejected a submission that the agreement was terminable by fourteen days’ notice. Had the agreement been indefinite, this submission would have been accepted: however, the court accepted evidence that “so well known and established is the custom in the profession that a mere engagement of a person to play a part in a certain play in London or the provinces constitutes a contract for such engagement for the run of the play in London or the provinces constitutes a contract for such engagement for the run of the play in London or for the tour, as the case may be, and there is no power on either side to determine the contract during the said run.” Another such case is Grundy v. Sun Printing and Publishing Association (1916) 33 TLR 77, where the court accepted that the custom for a newspaper editor was a twelve-month notice period and that a sub-editor was entitled to a six-month notice period and determined the period of reasonable notice these persons were entitled to accordingly. Yet another example is Fox-Bourne v. Vernon and Co. (1894) 10 TLR 647 where a six-month notice period for an editor was found to be reasonable by reference to the established custom for editors: in the same vein, see also Chamberlain v. Bennett (1892) 8 TLR 234 (where a subeditor of newspaper was held to be entitled to six months based on evidence of a custom).
Claim for damages for injury to reputation
At paragraph 6 of her Statement of Claim, the plaintiff claims that she “… has suffered and continues to suffer loss, damage, expense and distress and in particular, has suffered injury to her reputation as a journalist. Further, the plaintiff has been damaged by reason of the misrepresentation and/ or negligent misstatement of the defendant company, its servants or agents.”
At common law, the general rule for many years was that damages for the manner or unfortunate circumstances of the dismissal were not recoverable in a common law action for wrongful dismissal. This was laid down in Addis v. Gramophone Company Ltd. [1909] AC 488, where a plaintiff was awarded a sum of money in excess of the outstanding salary due to him for the notice period: the implication of this award was that the extra sum was compensation for the humiliating manner in which he had been dismissed. The House of Lords held that the plaintiff was only entitled to the salary he would have earned during the notice period, but the stressful and humiliating nature of the circumstances surrounding his dismissal could not be permitted to influence the court’s jurisdiction to award damages. Lord Loreburn LC commented:
“If there be a dismissal without notice the employer must pay an indemnity, but that indemnity cannot include compensation either for the injured feelings of the servant or for the loss that he may sustain from the fact that his having been dismissed of itself makes it more difficult for him to obtain fresh employment.”
It was held that the employee may have a separate action in tort for defamation or nervous shock, but damages in the wrongful dismissal context remained limited to the notice period. Early Irish authority suggested that Irish law would develop along the lines of the position in Addis: in Kinlen v. Ulster Bank Ltd. [1928] IR 171 at 184, Kennedy CJ stated:
“The plaintiff has relied on two matters for the purpose of aggravating the damages to which he is entitled. In the first place, he said that the bank manager not only refused him the money to which he was entitled, but refused it contemptuously, and with contumely. Indeed, I have no doubt that the plaintiff was very badly treated indeed by the bank. In the second place, he urged that by reason of the first refusal he was subjected to great humiliation in raising money to pay his workmen. He had to pawn some of his personal belongings to raise part of the money, and he had to borrow part of it from a friend. These matters were greatly pressed upon us, and they evoke much sympathy with the plaintiff, but they are not matters which can be considered as elements of damages. It is very clearly settled, both in this country and in England, and affirmed in many cases, that in actions for breach of contract damages may not be given for such matters as disappointment of mind, humiliation, vexation, or the like, nor may exemplary or vindictive damages be awarded. See Breen v. Cooper IR 3 CL 621; Hamlin v. Great Northern Railway 1 H & N 8; Addis v. Gramophone Co., Ltd. [1909] AC 488”
In Malik v. BCCI [1998] AC 20 (HL), the plaintiffs successfully claimed what are colloquially known as “stigma damages”, their dismissal occurring in the wake of their employer’s involvement in fraudulent banking practices. The plaintiffs issued proceedings on the basis of their difficulty in finding alternative employment stemming from their association with BCCI. The House of Lords held that, as a result of the bank’s fraudulent activities, the bank had breached the implied term of trust and confidence in the employment relationship and this breach was sufficient to make the employer liable for the financial loss suffered by the plaintiffs: such losses were not limited to any notice period. However, Malik does not seem to have altered the Addis principle: the award of damages in Malik was based upon the breach of the implied term of trust and confidence and in any event the basis upon which the award of damages was made was purely financial. Nevertheless, the case is authority for a limited right of recovery where an employee’s future job prospects have been damaged by the employer.
The High Court in England departed from the Addis position in Cox v. Phillips Industries Ltd. [1976] 1 WLR 638, but in 1985 the Court of Appeal reaffirmed the position in Addis in Bliss v. South East Thames Regional Health Authority [1987] 1 ICR 700. In Johnson v. Unisys Ltd. [2001] 2 All ER 801, the House of Lords endorsed its decision in Addis. In Johnson, the plaintiff had been summarily dismissed and had already been awarded damages for unfair dismissal by an industrial tribunal. He sought further damages to compensate him for the losses he suffered due to the manner in which he was treated and dismissed. The plaintiff tried to invoke the decision in Malik by claiming that he was entitled to such damages on the basis of breach of the implied term of trust and confidence in that the employer failed to afford him a proper opportunity to defend himself in disciplinary proceedings and failure to abide by the company’s disciplinary code. The lower courts struck out his proceedings and the House of Lords dismissed the appeal, holding that where an employee was wrongfully dismissed, any damages awarded could not take account of the manner of the dismissal or any adverse consequences thereof for the plaintiff. The decision appears to have been based upon policy considerations: Lord Hoffmann considered that the plaintiff’s claim was tantamount to an invitation to the court to
create a right to unfair dismissal at common law parallel to the statutory regime. He held at p.821 of the report that “…for the judiciary to construct a general common law remedy for unfair circumstances attending dismissal would be to go contrary to the evident intention of parliament that there should be such a remedy but that it should be limited in its application and extent.”
Lord Hoffmann also considered whether the implied term as to trust and confidence could have any application or relevance at the dismissal stage. He concluded that the term had always been concerned with the preservation of the employment relationship and not its termination and to extend its scope to dismissal contexts would have been “inappropriate and unnatural.” He held that at common law there was no obligation on an employer who had decided to end the employment relationship only for good cause: this was a matter for unfair dismissals legislation. This analysis regarding the scope of the implied term as to trust and confidence was subsequently applied by the Court of Appeal in Boardman v. Copeland County Council (unreported, Court of Appeal, 13th June 2002).
It is of interest to note that other common law jurisdictions have rejected Addis. In Stuart v. Armourguard Security [1996] 1 NZLR 484, the New Zealand High Court held that it was an implied term of the employment contract that an employee should not be dismissed in a manner likely to cause distress or loss of reputation, without proper cause. In that case, a regional manager who was peremptorily dismissed after he declined to tender his “non-negotiable resignation” was awarded general damages not limited by the Addis principle.
Conclusions:
I am satisfied that the plaintiff made it perfectly plain to Mr. Drury that she could not work the morning shift for the first edition from the offices of the Evening Herald: accordingly, Mr. Drury knew that if such an arrangement was not in place, the plaintiff could not undertake the job. I am satisfied that Mr. Drury did not express the serious reservations that were held by Senior Management as regards the proposed working arrangements and equally that he did not advise Senior Management that the plaintiff could not take up the position if the proposed morning working arrangements were not agreed or proved unworkable. In my view, this is the crucial point in the
case. I am satisfied that Mr. Drury was anxious to retain the services of the plaintiff and never foresaw that there would be any difficulty in the matter.
I take the view that the agreement as regards the morning working conditions was a fundamental term of the agreement reached between Mr. Drury and the plaintiff and that it constituted a warranty and an inducement to the plaintiff to give up her contractual arrangement with Ireland on Sunday. Furthermore, I am satisfied that the plaintiff left her job with Ireland on Sunday to join the Evening Herald as a result of the representation made by Mr. Drury that the plaintiff could work from home for the first edition of the Evening Herald. I am also satisfied on the evidence as a matter of probability that without the assurance on the morning working arrangements, the plaintiff would not have taken up employment with the defendants.
…….
On the issue of reasonable termination of the plaintiff’s contract of employment, I take the view that both the N.U.J. current agreement and the situation that pertained to Mr. Dowling when he left the defendant company to join the Sunday Times are different from the situation that faced the plaintiff when she was approached by the defendant company because she had in place a contractual arrangement and if a termination period had been discussed, undoubtedly it would have been an important factor for her consideration. In any event, it was never discussed or indeed touched on in any way and there was no provision in place as to an agreed period of notice of termination.
In all the circumstances of this case, including the factual background as to how the plaintiff came to be employed by the Defendant, the importance which Mr. Paul Drury attached to the plaintiff’s employment, her esteemed professional ability, the fact that she was moving from a job to take up this position and most importantly the difficulty that she would undoubtedly face as a Political Correspondent in achieving a similar position in the greater Dublin area lead me to the conclusion that a reasonable period of notice of termination of the plaintiff’s employment with the Defendant Group would be six months or alternatively six months’ net loss of earnings in lieu of notice.
Insofar as the plaintiff has advanced a claim for damages for injury to reputation, I do not consider that in the particular circumstances of this case the plaintiff has made out such a case for loss of reputation against a background where no aspersion was cast on the plaintiff’s capacity and integrity as a journalist and, in particular, as to her role as political correspondent. The reality of the situation, I believe, is that the defendants were well intentioned to the plaintiff and, as I have already stated, in a different set of circumstances the arrangement would probably have worked very well. Furthermore, if it were possible for the plaintiff to have worked for the first edition from the offices of the Evening Herald, it is quite clear that the arrangement would have continued. Accordingly, I conclude that there is no basis for any claim for injury to the plaintiff’s reputation and, in these circumstances, it is not necessary for me to consider the legal issue as to whether or not there is a remedy in Irish law in respect of a valid claim for damages for loss of reputation arising from a termination of a contract of employment.
Mc Carthy -v- Breeo Foods Ltd & Ors
[2009] IEHC 524
Hanna J.
Material Law
It is already noted, I have ruled that this matter should proceed as an action for damages at common law for wrongful dismissal. The plaintiff had available to him an alternative remedy under the Unfair Dismissals legislation. That procedure exists independently of the common law remedy and is exclusive of it. The relationship between the action for wrongful dismissal and the statutory provisions was considered by the Supreme Court in Parsons v. Iarnród Éireann [1997] 2 I.R. 523 at p. 529, where Barrington J. said:-
“This is not a case of the ouster of the jurisdiction of the High Court. The jurisdiction of the High Court remains the same. What the Unfair Dismissals Act 1977 does is to give to the worker who feels that he has been unfairly dismissed, an additional remedy which may carry with it the very far-reaching relief of reinstatement in his previous employment. It does not limit the worker’s rights; it extends them. At the same time, s. 15 of the Unfair Dismissals Act 1977, provides that the worker must choose between suing for damages at common law and claiming relief under the new act. Sub-section 2 accordingly provides that if he claims relief under the act, he is not entitled to recover damages at common law; while sub-s. 3 provides that where proceedings for damages at common law for wrongful dismissal are initiated by or on behalf of an employee the employee shall not be entitled to redress under the Unfair dismissal Act, in respect of the same dismissal.”
The scope of the remedy available to the plaintiff in an action for wrongful dismissal is stated thus by McLachlin J. in Wallace v. United Grain Growers Ltd [1997] 152 D.L.R. (4th) 1 at 39:-
“The action for wrongful dismissal is based on an implied obligation in the employment contract to give reasonable notice of an intention to terminate the relationship (or pay in lieu thereof) in the absence of just cause for dismissal… A “wrongful dismissal” action is not concerned with the wrongness or rightness of the dismissal itself. Far from making dismissal a wrong, the law entitles both employer and employee to terminate the employment relationship without cause. A wrong arises only if the employer breaches the contract by failing to give the dismissed employee reasonable notice of termination. The remedy for this breach of contract is an award of damages based on the period of notice which should have been given.”
This view has been approved in this jurisdiction and most recently in Sheehy v. Ryan & Moriarty [2008] IEHC 14.
If a plaintiff establishes a wrongful dismissal, the scope of the damages available to him are circumscribed by law. He is entitled to recover the financial or pecuniary loss which his employer’s act of wrongful dismissal has visited upon him. It has long been established that the dismissed employee cannot, for example, recover damages for his hurt feelings. (See Addis v. Gramophone [1909] AC 488). Therefore, no matter how hurt or upset the plaintiff was from his perception of the manner in which he was treated by the defendants (and without forecasting my findings below, I have little doubt that he was) he cannot be compensated for that. Thus, the successful plaintiff is entitled to be compensated to such extent as would put him (or her) in a situation similar to that which would have obtained had the contract been performed in due course. This contrasts with a plaintiff who has been subjected to a tort and is well described thus by Geoghegan J. in Doran v. Delaney (No.2) [1999] 1 IR 303 at p. 308:-
“If a party to a contract breaks that contract the other party is entitled to be compensated on the basis of what he has lost by reason of the contract not being performed. On the other hand the measure of damages appropriate for the tort of negligence is the loss sustained by reason of the breach of duty or in other words in the case of say negligent misrepresentation the plaintiff must be restored to the position he would have been in if the misrepresentation had not been made.”
T -v- Irish Packaging Recycling Ltd
O’Donovan v Over-C Technology Ltd & ANOR
(Approved) [2020] IEHC 291 (12 June 2020)
JUDGMENT of Mr Justice David Keane delivered on the 12th June 2020
Introduction
1. This is an employment injunction application, brought against the background of an action for wrongful dismissal challenging both the decision made on 7 January 2020 by the first defendant/respondent, Over-C Technology Limited (‘Over-C Technology’), to terminate the employment of the plaintiff/applicant, Donal O’Donovan, and its subsequent confirmation of that decision on 17 January, when it deemed Mr O’Donovan’s appeal against dismissal to have been withdrawn. The second defendant/respondent, Over-C Limited (‘Over-C’), an English-registered company, is the parent of Over-C Technology. Thus, collectively, Over-C Technology and Over-C are the defendants.
Procedural history
2. On 29 January, Mr O’Donovan issued proceedings. A memorandum of appearance was entered on behalf of each of the defendants on 5 and 6 February, respectively. On 18 February, Mr O’Donovan delivered a statement of claim in which he seeks, among other reliefs: declarations that his dismissal was unlawful and, hence, invalid and that he remains employed by the defendants; permanent injunctions requiring the defendants to acknowledge and maintain the position as such; and damages against the defendants for breach of contract, breach of duty, and breach of his constitutional right to fair procedures.
3. On 31 January, Mr O’Donovan sought, and was granted, leave ex parte to effect short service of the present motion. He filed and issued a notice of motion on 31 January, initially returnable to 6 February on the direction of Reynolds J. The principal interlocutory reliefs that Mr O’Donovan seeks are injunctions pending trial in terms of the permanent injunctions that he claims as substantive relief. The application is grounded on an affidavit sworn by Mr O’Donovan on 30 January. Michael Elliot, the chief executive officer (‘CEO’) of each of the defendants, swore an affidavit in reply on 14 February, supplemented by a short affidavit of John Boylan, a partner in the firm of solicitors representing the defendants, sworn on the same date. Mr O’Donovan swore a second affidavit on 18 February, as did Mr Elliot one week later. Still further affidavits sworn by Mr O’Donovan on 26 February and Mr Elliot on 10 March were later exchanged. Finally, Liam Wade, the general manager and company secretary of Over-C Technology, swore a short affidavit on its behalf on 25 May that I gave the defendants leave to file in court. I have considered the contents of each of those affidavits.
4. The defendants gave an undertaking to the court (O’Connor J) on 6 February that they would not appoint another person to the role of CFO pending the determination of the present application.
5. The application was argued before me on 25 May. The defendants had not yet delivered a formal defence.
Background
6. Mr O’Donovan is a chartered management accountant. By letter dated 30 May 2019 (‘the employment offer letter’), Mr Elliot offered him the position of chief financial officer (‘CFO’) of ‘our Irish company Over-C Technology and Over-C Ltd in the UK’.
7. On 31 May 2019, Mr O’Donovan signed a contract with Over-C Technology, headed ‘Statement of Main Terms of Employment’ (‘the contract’), which recites that it forms part, and sets out the main terms, of his ‘Contract of Employment’. The contract states that Mr O’Donovan’s employment with Over-C Technology as CFO was to begin on 22 July 2019, and that the CEO was to be his line manager.
8. Among the other express terms of the contract, are the following:
‘PROBATIONARY PERIOD
An initial probationary period of six months applies to this position. During this period your work performance will be assessed and, if it is satisfactory, your employment will continue. However, if your performance is not up to the required standard, we may either take remedial action or terminate your employment.
…
TERMINATION TO BE GIVEN BY EMPLOYER: One month in the first year, [t]hree months thereafter.
…
DISCIPLINARY RULES AND PROCEDURES
The disciplinary rules and procedures that apply to your employment are shown in the Employee Handbook to which you should refer.
DISCIPLINARY APPEAL PROCEDURE
The disciplinary rules and procedures which form part of the Contract of Employment incorporate the right to lodge an appeal in respect of any disciplinary action taken against you. If you wish to exercise this right, you should apply either verbally or in writing to the General Manager or the CEO within five working days of the decision you are complaining against.’
9. Mr O’Donovan has exhibited the Employee Handbook that was furnished to him in conjunction with the contract. It contains little in the way of disciplinary rules and nothing on disciplinary procedures.
10. Mr O’Donovan began work as CFO of Over-C Technology in Cork on 6 August 2019. Between 13 December 2019 and 6 January 2020, he was on annual leave.
11. Upon his return from leave on 7 January, Mr O’Donovan was called to a meeting with the CEO, Mr Elliot. At that meeting, Mr Elliot informed Mr O’Donovan, that his employment with Over-C Technology was terminated with immediate effect and that he was to receive one month’s pay in lieu of notice.
12. As CEO of Over-C Technology, Mr Elliot later wrote to Mr O’Donovan, confirming that decision. The letter (for ease of reference, ‘the letter of termination’) is dated 8 January, though Mr O’Donovan contends that post office records show it was sent by registered post on Friday, 10 January, and delivered on Monday, 13 January. The letter states that Mr O’Donovan’s performance in the role of CFO was sub-standard and had been identified to him as such by Over-C Technology board members at earlier meetings. In particular, it alleges that Mr O’Donovan had: (a) provided an inflated and, hence, misleading projected sales figure at a board meeting on 2 December 2019; (b) failed to prepare adequately for a board meeting on 19 December 2019; and (c) failed to answer a question from the board about the company’s ‘basic cash position.’ The letter concludes by confirming that Mr O’Donovan’s employment with Over-C Technology had been terminated the day before with immediate effect in line with the terms of his contract of employment and within his probationary period and that he would receive one month’s pay in lieu of notice.
13. Meanwhile, on the afternoon of 8 January, Mr O’Donovan emailed Mr Elliot, asserting that, under his contract of employment, he had an entitlement to appeal the decision to terminate his employment. Just over two hours later, Mr Elliot emailed in reply:
‘You are correct that there is an [a]ppeal process. A member of our [b]oard of [d]irectors will hear your [a]ppeal and this will be arranged shortly. You will be contacted next week to agree a date and location for this meeting.’
14. On 14 January, Eileen Moloney, a director of Over-C Technology, wrote to Mr O’Donovan in the following terms:
‘I’m in receipt of your mail of 8th Jan in which you wish to appeal against the decision to dismiss you on 7th January. This was confirmed in writing to you in the letter dated 8th January (attached).
I write to confirm that I will hear your appeal, the hearing details are as follows:
Date: Fri 17th January
Time: 14.30 hours
Venue: Over-C Boardroom, 12 South Mall [Cork]
The hearing will be conducted by way of a review of the original decision. The appeal hearing will be chaired by me in the presence of a Company witness, who will take notes.
You may wish to be accompanied at the appeal. If you wish to be accompanied, please contact me on the number below, by Thursday 16th at 17.00 hrs to advise me of the name of the person, so that any necessary arrangements can be made.
The decision of this appeal hearing is final and there is no further right of review. If you have any queries concerning the content of this letter please contact me.’
15. Mr O’Donovan received that letter via an email sent to him by Ms Moloney at 6.23 p.m. on 14 January. He replied by email on 16 January, opening by stating that the time fixed for the proposed appeal hearing was not convenient for him or his legal representative, then raising a number of procedural issues, before concluding with the assertion that Over-C Technology must address those issues ‘as quickly as possible as delay will allow matters to fester and worsen.’
16. Ms Moloney responded by letter, dated 17 January, stating in material part:
‘I note you do not now wish to proceed with the appeal today.
I now confirm your dismissal stands.’
17. On 24 January, Mr O’Donovan’s solicitors wrote a letter before action to each of the defendants, claiming that his dismissal ‘for misconduct’ was unlawful and had been effected in breach of his contract of employment. On behalf of Mr O’Donovan, they called upon the defendant to: (a) withdraw the allegations of ‘misconduct’ contained in Mr Elliot’s letter of 8 January; (b) make a full written apology to Mr O’Donovan; and (c) reinstate him as CFO, by close of business on 28 January 2020, failing which proceedings for wrongful dismissal would issue and injunctive relief would be sought.
18. The defendants’ solicitors responded by email on 30 January 2020, stating that: (a) Mr O’Donovan had received one month’s pay in lieu of notice and his employment would finish on 7 February 2020; (b) Mr O’Donovan’s employment had been terminated during his initial six-month probationary period for reasons clearly set out by Mr Elliot; and (c) Mr O’Donovan’s claims were without foundation and would be vigorously defended.
19. Here, it is convenient to consider briefly two issues that the defendants have raised on affidavit.
20. First, their solicitor Mr Boylan has averred that the statement in that email that Mr O’Donovan’s employment would end on ‘7 February 2020’ was a typographical error and should have read ‘7 January 2020’ because that is the date upon which Mr Elliot informed Mr O’Donovan that his employment was terminated with immediate effect. It seems to me that whether Mr O’Donovan was summarily dismissed with immediate effect on 7 January 2020 or was given one month’s notice of dismissal on that date in accordance with the relevant term of his contract of employment (so that his employment finished on or about 7 February 2020), depends in significant part on the true interpretation of the letter of termination (‘your employment with Over-C Technology was terminated with immediate effect in line with the terms of your Contract of Employment within your stated [p]robationary [p]eriod’); see, for example, the decisions of the England and Wales (‘EW’) Court of Appeal in I. Brindle v H W Smith (Cabinets)[1972] IRLR 125 and R J Dedman v British Building and Engineering Appliances Ltd [1973] IRLR 379. While that may or may not be an issue at trial, I cannot see that it is material to the determination of the present application.
21. Second, Mr Elliot has averred that the effect of the term of Mr O’Donovan’s contract of employment stipulating a six-month probationary period was to create, in effect, a six-month fixed term contract, subject to extension or continuation only upon satisfactory performance. In so far as it is necessary to address that assertion for the purpose of the present application, there is a strong case to be made that Mr O’Donovan’s contract of employment was one of indefinite duration, subject to the entitlement of his employer to terminate his employment if his performance was ‘unsatisfactory’ or ‘not up to the required standard’ during his initial six-month probationary period; that is to say, a contract that would continue unless terminated on the ground of unsatisfactory performance, rather than one that would expire after six-months unless extended on the ground of satisfactory performance, as Mr Elliot claims.
22. To conclude the chronology of events that are not in dispute, Mr O’Donovan did receive the payment of one month’s salary on 30 January, which was the day after the these proceedings issued and the day before the present motion did.
The case for an employment injunction
23. In these proceedings, Mr O’Donovan advances several different causes of action beyond breach of contract. There is a claim in misrepresentation, alleging that he was induced to enter the defendants’ employment in reliance upon statements that were untrue concerning both the size of the defendants’ revenue stream and client base and his eligibility as CFO to acquire equity in the business. And there is a claim in defamation, alleging that the dismissal letter of 8 January 2020 is defamatory in content and was published to third persons. Those claims, which are denied by Mr Elliot on behalf of the defendants, are of no relevance to the present application.
24. Also of no relevance, are Mr Elliot’s averments, on behalf of the defendants, that Mr O’Donovan has acted in breach of their confidence – a claim that Mr O’Donovan denies. Mr Elliot deposes to having recently become aware of the unauthorised disclosure by Mr O’Donovan on 8 November and 4 December of certain of the defendants’ confidential commercial information to a third party, an identified business consultant. In response, Mr O’Donovan avers that, at all material times, his interactions on behalf of the defendants with that business consultant were known to, and authorised by, Mr Elliot, a claim that, in turn, Mr Elliot denies. Mr Elliot has since expanded on the defendants’ claims by suggesting that Mr O’Donovan had wrongly sent the defendants’ confidential information to his personal email account. Mr O’Donovan’s position is that he accessed his work email account on his home computer with the defendants’ express consent and that he has offered to make his computer available for inspection. According to Mr Elliot, Over-C Technology may issue separate proceedings against Mr O’Donovan for breach of contract or breach of confidence, or both.
25. The part of Mr O’Donovan’s case, as pleaded, that underpins the present application for injunctive relief is his claim that his dismissal was effected in breach of contract and in breach of his constitutional right to fair procedures, such that (in addition – or as an alternative – to damages) he is entitled to a declaration that he continues to be employed by the defendants as CFO or that his purported dismissal from that position is invalid, or both.
26. From his pleadings, it is clear that Mr O’Donovan rejects the assertion that his performance in the role of CFO was unsatisfactory or, differently put, that it was below the required standard. Further, he pleads that the defendants never informed him of any issue with, or concern about, the standard of his performance, prior to his meeting with Mr Elliot on 7 January 2020. Mr O’Donovan and, on behalf of the defendants, Mr Elliot have joined issue on those two propositions at length over three exchanges of affidavit. Indeed, Mr Elliot now avers to a number of alleged instances of unsatisfactory or sub-standard performance by Mr O’Donovan in the role of CFO in addition to those identified in the letter of termination, each of which Mr O’Donovan denies or rejects on oath.
27. Quite apart from any issue concerning his conduct or performance as CFO, Mr O’Donovan goes on to plead that the procedures used to effect his dismissal breached both the express and implied terms of his contract of employment. According to Mr O’Donovan, the express terms breached are those dealing with ‘disciplinary rules and procedures’ and ‘disciplinary appeal procedure’, set out earlier in this judgment. In addition, Mr O’Donovan contends that the defendants breached an implied term of that contract that those rules and procedures would be fair and in accordance with the requirements of natural and constitutional justice.
28. Mr O’Donovan’s central contentions are that the defendants breached those terms by: (a) effecting his dismissal before affording him an opportunity to appeal; (b) failing to provide him with adequate notice of the arrangements for the conduct of the appeal, once that entitlement was conceded after his dismissal; and (c) wrongly and unreasonably deeming his appeal to have been withdrawn when informed by him that the arrangements they had unilaterally made for it were not convenient. Through Mr Elliot’s averments, the defendants join issue with those claims, adopting the position (simply stated) that Mr O’Donovan: (a) was offered an appeal (albeit only upon requesting one after he was informed of his summary dismissal); (b) was given adequate notice of the arrangements they had made for the conduct of his appeal; and (c) did, in effect, withdraw that appeal by writing to inform them that those arrangements were not convenient for him but without proposing alternative ones.
29. Finally, in describing the issues between the parties, I do not overlook Mr Elliot’s averment on behalf of the defendants that, despite Mr O’Donovan’s express plea that he was employed by both defendants (as reflected in the terms of the employment offer letter signed by Mr Elliot), his contract of employment was with Over-C Technology alone (as reflected in the contract that Mr O’Donovan signed).
The test for an employment injunction
30. The proper approach to an application for an interlocutory injunction was recently restated in Merck Sharp & Dohme Corp v Clonmel Healthcare Ltd [2019] IESC 65 (Unreported, Supreme Court (O’Donnell J; Clarke CJ, McKechnie, Dunne and O’Malley JJ concurring), 31 July 2019) (‘Merck’).
31. The general principles remain those identified by Lord Diplock in American Cyanamid Co v Ethicon Ltd [1975] AC 396 (HL) (at 407-9) and approved by the Supreme Court in Campus Oil v Minister for Industry (No. 2) [1983] 1 IR 88 (O’Higgins CJ and Griffin J, Hederman J concurring) (‘the Campus Oil principles’).
32. At the risk of crude over-simplification, I consider those principles to be that the applicant must establish that: (1) there is a serious question to be tried on the applicant’s entitlement to a permanent injunction; (2) the balance of convenience favours the grant of interlocutory relief, which requires, but is not limited to, a consideration of whether damages would be an adequate and effective remedy for an applicant who fails to obtain interlocutory relief but later succeeds in the action at trial and, if not, whether the applicant’s undertaking to pay damages would be an adequate and effective remedy for a respondent against whom interlocutory injunctive relief is granted but whose defence to the action succeeds at trial. While Lord Diplock’s speech in American Cyanamid was ambiguous on whether the adequacy of damages was a consideration antecedent to, or part of, that of the balance of convenience, the judgment of O’Donnell J in Merck (at para. 35) has now clarified that it is preferable to consider adequacy of damages as part of the balance of convenience, thus emphasising the flexibility of the remedy.
33. Where a mandatory injunction is sought, such as where an applicant seeks an injunction restraining dismissal (which is, in substance, an injunction mandating the continuation of an employment relationship), the Campus Oil principles are subject to the significant refinement that an applicant must establish at least a strong case, likely to succeed at the hearing of the action, and not merely surmount the lower threshold of establishing a serious question to be tried; Maha Lingam v Health Service Executive [2005] IESC 89, [2006] 17 ELR 137 (per Fennelly J at 140). Mr O’Donovan accepts – correctly, in my view – that the strong case test is the one that he must meet in order to obtain the relief that he seeks in the present application.
34. In Merck, O’Donnell J pointed out that it would be an error to treat the Campus Oil principles as akin to statutory rules (at para. 34), before later outlining the steps that might usefully be followed in considering an interlocutory injunction application (at para. 64):
‘(1) First, the court should consider whether, if the plaintiff succeeded at the trial, a permanent injunction might be granted. If not, then it is extremely unlikely that an interlocutory injunction seeking the same relief upon ending the trial could be granted;
(2) The court should then consider if it has been established that there is a fair question to be tried, which may also involve a consideration of whether the case will probably go to trial. In many cases, the straightforward application of the American Cyanamid and Campus Oil approach will yield the correct outcome. However, the qualification of that approach should be kept in mind. Even then, if the claim is of a nature that could be tried, the court, in considering the balance of convenience or balance of justice, should do so with an awareness that cases may not go to trial, and that the presence or absence of an injunction may be a significant tactical benefit;
(3) If there is a fair issue to be tried (and it probably will be tried), the court should consider how best the matter should be arranged pending the trial, which involves a consideration of the balance of convenience and the balance of justice;
(4) The most important element in that balance is, in most cases, the question of adequacy of damages;
(5) In commercial cases where breach of contract is claimed, courts should be robustly sceptical of a claim that damages are not an adequate remedy;
(6) Nevertheless, difficulty in assessing damages may be a factor which can be taken account of and lead to the grant of an interlocutory injunction, particularly where the difficulty in calculation and assessment makes it more likely that any damages awarded will not be a precise and perfect remedy. In such cases, it may be just and convenient to grant an interlocutory injunction, even though damages are an available remedy at trial;
(7) While the adequacy of damages is the most important component of any assessment of the balance of convenience or balance of justice, a number of other factors may come into play and may properly be considered and weighed in the balance in considering how matters are to be held most fairly pending a trial, and recognising the possibility that there may be no trial;
(8) While a structured approach facilitates analysis and, if necessary, review, any application should be approached with a recognition of the essential flexibility of the remedy and the fundamental objective in seeking to minimise injustice, in circumstances where the legal rights of the parties have yet to be determined.’
35. Finally, in approaching the test I must apply to the evidence that I have attempted to summarise, I am conscious of Lord Diplock’s admonition in American Cyanamid (at 407):
‘It is no part of the court’s function at this stage of the litigation to try to resolve conflicts of evidence on affidavit as to facts on which the claims of either party may ultimately depend nor to decide difficult questions of law which call for detailed argument and mature considerations. These are matters to be dealt with at trial.’
A serious question to be tried?
36. In his statement of claim, Mr O’Donovan pleads that he was dismissed for misconduct. In particular, he pleads that, in asserting in the letter of termination that he had provided an inflated and, hence, misleading sales figure to the board, the defendants meant – and were dismissing him for the reason that – he had deliberately misled the board and, hence, was dishonest and untrustworthy. Further, Mr O’Donovan goes on to plead that this in turn by innuendo meant that he was in breach of the Code of Conduct of the Institute of Management Accountants. Thus, Mr O’Donovan makes the case that he was dismissed on grounds of alleged misconduct, without the benefit of the appropriate disciplinary procedures, including an appeal.
37. Through the averments of Mr Elliot, the defendants adamantly deny that Mr O’Donovan’s dismissal was based on any allegation of misconduct. They point to the express terms of the letter of termination, which makes no reference to misconduct and specifically states instead that Mr O’Donovan’s performance in his role was, variously, sub-standard and unacceptable and that his employment had been terminated in line with the terms of his contract, ‘within his stated probationary period’.
38. Remember, the ‘probationary period’ term in the contract signed by Mr O’Donovan required Over-C Technology to assess his performance within the initial six months of his employment and, if it was not up to the required standard, permitted Over-C Technology to either take remedial action or terminate his employment. In that context, Mr O’Donovan pleads that at no time during his employment was he ever informed of any issue with his performance nor was he afforded any, or any adequate, opportunity to address the alleged shortcomings identified by Mr Elliot at their meeting on 7 January and in the letter of termination.
39. Remember, also, that Mr O’Donovan emailed Mr Elliot on 8 January, stating ‘as per the contract there is an appeal process’, and Mr Elliot emailed in reply on 9 January, stating ‘[y]ou are correct that there is an [a]ppeal process.’ Mr Elliot has since averred, in the affidavit that he swore on behalf of the defendants on 25 February, that Mr O’Donovan had no contractual entitlement to an appeal but was offered one ‘as a matter of courtesy’. The circumstances in which the defendants came to deem Mr O’Donovan’s appeal to have been withdrawn have already been described.
40. Mr O’Donovan pleads that, what he describes as, the ‘disciplinary’ process established by the defendants was unfair and conducted in breach of both his entitlement to natural and constitutional justice and the implied contractual obligation of mutual trust, good faith and confidence between employer and employee.
41. On the basis of the evidence and arguments just described, I am not satisfied that Mr O’Donovan has established a strong case, likely to succeed at the trial of the action, that he was dismissed, wrongly and in breach of his entitlement to fair procedures, for ‘misconduct’. Having regard to the present state of the evidence and, in particular, the express terms of the letter of termination, it seems significantly more probable that the ground for his dismissal was that of poor performance during his probationary period.
42. The question that then arises is whether Mr O’Donovan’s dismissal on that ground was properly effected in accordance with the terms of his contract. On that issue, I conclude, on the current state of the evidence, that Mr O’Donovan has established a strong case, likely to succeed at trial, that it was not. As matters stand, there is nothing to suggest that either the instances of alleged sub-standard or unsatisfactory performance identified in the letter of termination or any of the various other instances of alleged poor performance since averred to by Mr Elliot were ever drawn to Mr O’Donovan’s attention as performance issues, either orally or in writing, prior to the meeting of 7 January at which he was summarily dismissed on that basis.
43. Of course, Mr O’Donovan’s case at trial will be stronger if he can persuade the court that the express terms of the contract dealing with ‘disciplinary rules and procedures’ and ‘disciplinary appeal procedure’ directly apply to allegations of sub-standard or unsatisfactory performance raised in the context of the ‘probationary period’ term of the contract. But, even if Mr O’Donovan cannot do so, there remains a strong case that, in the specific circumstances of his contractually required performance assessment, he was entitled to a level of procedural fairness that he did not receive, most obviously in the context of both a right to be heard and a right of appeal.
44. In referring to the specific circumstances of that assessment, I have in mind principally the following: first, that it was contractually mandated and capable of resulting in either remedial action by Over-C Technology or the termination of Mr O’Donovan’s employment if his performance was found not to have reached a required standard; second, the specific nature of Mr O’Donovan’s probation, whereby, as a qualified management accountant, he was directly appointed to a senior role, rather than – as is more frequently the case with probationary employment – required to successfully complete an initial course of training or instruction in the skills required for an entry-level position; third, the potential seriousness of an adverse performance assessment, reputationally and economically, for a qualified person engaged in a professional role; and fourth, the exchange of email correspondence on 8 and 9 January, whereby, in response to Mr O’Donovan’s assertion of a contractual entitlement to an appeal, Mr Elliot acknowledged there was an appeal process, without any qualification to the effect that it was being offered only as a courtesy and not as a contractual entitlement. In those circumstances, I judge that there is a strong case to be made that Mr O’Donovan was dismissed for sub-standard performance during his probationary period without being afforded his implied contractual right to be heard as part of that assessment or to appeal against an adverse assessment, or both.
45. The strength of Mr O’Donovan’s case in this regard derives from the defendants’ express reliance in the letter of termination on the allegation that his performance in the role of CFO was sub-standard and unacceptable and the express statement in that letter that his employment had been terminated in line with the terms of his contract, ‘within his stated probationary period’. Thus, while – on the present state of the evidence – it seems to me that the termination of Mr O’Donovan’s employment was not a ‘misconduct’ dismissal, nor was it merely a dismissal on notice.
46. As Ms Kimber SC for the defendants sought to emphasise and Ms Bolger SC for Mr O’Donovan candidly acknowledged, the traditional common law position is that a contract of employment can be terminated by an employer on reasonable notice whether for good or bad reason (or, indeed, no reason at all); see, for example, the judgment of Fennelly J in Maha Lingam (at 140). The contract in this case contains an express term that the notice of termination to be given by the employer shall be ‘[o]ne month in the first year.’ However, as Fennelly J went on to observe (at 141):
‘… [W]here a dismissal is by reason of an allegation of misconduct by the employee, the courts have in a number of cases at any rate imported an obligation to comply with the rules of natural justice and give fair notice and a fair opportunity to reply.’
47. In Carroll v Bus Atha Cliath/Dublin Bus [2005] 4 IR 184 (at 208), Clarke J explained that, while in general an employer may, if contractually free to do so, dismiss an employee for any reason or no reason at all, it is no less the case that, where an employer chooses to rely upon stated misconduct as the reason for dismissal, an obligation arises to conduct the process leading to that determination in accordance with the principles of natural justice.
48. Although, on the evidence before me, I am not persuaded that this is a misconduct dismissal case, nonetheless, depending upon the terms of the relevant contract, the same obligation may apply to a ‘poor performance’ dismissal, as Laffoy J made clear in Naujoks v Institute of Bioprocessing Research & Training Ltd [2006] IEHC 358, [2007] ELR 25.
49. The facts of the present case are different to those in Hughes v MongoDB Ltd [2014] IEHC 335, (Unreported, High Court (Keane J), 6 June 2014). The employer in that case gave did not give an adverse performance assessment as the reason for the employee’s dismissal but relied solely on its asserted contractual entitlement to dismiss on notice. The letter of termination went on to state that the employee would be provided with a standard reference. That is not the position here, where the reason given for dismissal was sub-standard or unsatisfactory performance during the probationary period; a claim that has since been amplified and expanded upon in the three affidavits that Mr Elliot has sworn on behalf of the defendants.
50. I have found that Mr O’Donovan has established a strong case that: (1) the stated reason for his dismissal was his sub-standard or unsatisfactory performance during his probationary period; (2) a fair procedures obligation in the conduct of the relevant performance assessment arises under the terms of his contract of employment; and (3) there was a breach of that obligation in this case.
51. In view of the interlocutory nature of the present application, it will suffice to say only that I am not persuaded that the analogy the defendants seek to draw between the ‘probationary period’ term of the contract now at issue and the statutory power to terminate the services of a civil servant working in a probationary capacity under s. 7 of the Civil Service Regulation Act 1956, as amended, is a valid one, sufficient to deprive Mr O’Donovan’s case of the strength necessary to obtain relief. That is to say, I am not persuaded of the force of the argument that an employer’s entitlement to dismiss a probationary employee, regardless of the specific terms of the contract between them, is the same as, or co-extensive with, that of the appropriate State authority to terminate the services of probationary civil servant under that Act as a matter of public law. Thus, I glean no assistance from a consideration of the line of authority relied upon by the defendants in that regard, culminating in the decision of the High Court (per Barron J) in The State (Daly) v Minister for Agriculture [1987] 1 IR 165.
52. For the same reason, I cannot see that the decision of the Supreme Court in Hickey v Eastern Health Board [1991] 1 IR 210 – holding that the rules of natural justice had no application to a decision to dismiss, by reason of redundancy rather than misconduct, a person who, by operation of the provisions of the Health Act 1970, was a temporary officer of the health board – is of any relevance to the present case, which must be determined by reference to the proper construction of the contract between the parties as a matter of private law and which does not involve a decision that is, or can be, susceptible to judicial review.
53. I can find no meaningful analogy between the position here and that which arose before O’Connor J in Earley v Health Service Executive [2015] IEHC 841, (Unreported, High Court, 27 November 2015), another authority upon which the defendants seek to rely. That decision was subsequently reversed on appeal in Earley v Health Service Executive [2017] IECA 158, (Unreported, Court of Appeal (Hogan J; Finlay Geoghegan and Peart JJ concurring), 5 May 2017) and an injunction was ultimately granted reinstating the appellant to the contractual position with the HSE from which she had been transferred; Earley v Health Service Executive (No. 2) [2017] IECA 207. As the decision of each court in that case made clear, the issue in cases of this kind is always the proper construction of the relevant contract.
The balance of convenience or least risk of injustice
54. Following the steps suggested in Merck, it seems to me that: (1) if Mr O’Donovan succeeded at trial, a permanent injunction might well be granted directing his reinstatement, or restraining his dismissal on the ground invoked, in the absence of a performance assessment conducted in accordance with his entitlement to fair procedures; and (2) this is not a case in which the grant of an interlocutory injunction will per se determine the issues between the parties, thus rendering any trial superfluous, although I do not overlook the tactical significance attributed to the grant or refusal of interlocutory relief in employment cases, as evidenced by the limited proportion of them that ultimately proceed to trial. Clarke J observed in Bergin v Galway Clinic Doughiska Ltd [2008] 2 IR 205 (at 212) that, when dealing with employment injunctions, it would be ‘somewhat naïve not to surmise that a significant feature of the interlocutory hearing is concerned with both parties attempting to establish the most advantageous position from which to approach the frequently expected negotiations designed to lead to an agreed termination of the contract of employment concerned.’
55. It is thus necessary to consider (3) how the matter should be arranged pending trial, with due regard to the balance of convenience and the balance of justice. This requires a consideration (4) of the adequacy of damages, bearing in mind that this is an employment, rather than a commercial, claim, and that the former may not require (5) the same robust scepticism about the claimed inadequacy of an award of damages as the latter. In considering the adequacy of damages, it is also necessary to take into account (6) as a factor any difficulty there may be in assessing damages. It is also necessary to consider (7) any other factors that come into play and must be weighed in the balance in considering what arrangement is fairest pending trial, bearing in mind there may be no trial. Finally, as an overarching principle, the application must be approached recognising (8) the essential flexibility of the remedy and the fundamental objective of seeking to minimise injustice prior to the determination of the legal rights of the parties at trial.
56. There is not the slightest doubt in this case that a relationship of mutual trust and confidence no longer exists between Mr O’Donovan and the defendants. Mr O’Donovan claims, among other things, that he was induced to enter the defendants’ employment by misrepresentation and that, in the manner and circumstances of his dismissal, they have traduced his reputation. The defendants claim, among other things, that Mr O’Donovan’s performance as CFO was sub-standard and that, while in that position, he wrongly disclosed sensitive commercial information to a third party in breach of confidence. That is, to put it no higher, a very weighty factor against the grant of an interlocutory order that would require, rather than permit, the defendants to allow Mr O’Donovan to resume his duties as CFO; see, for example, Harte v Kelly [1997] 8 ELR 125; and Bergin, already cited.
57. Mr O’Donovan apprehends that he will suffer reputational, as well as direct financial, damage in consequence of a performance assessment that he claims was conducted in breach of his entitlement to fair procedures and was wrong in its result. While it is possible to assess damages for reputational injury, that might not be a precise and perfect remedy in the circumstances.
58. More fundamentally, Mr O’Donovan has averred, albeit tersely, that without remuneration pending trial, he will be unable to discharge his debts as they fall due; including his monthly mortgage payments, insurance premiums and the expenses associated with rearing a young family. In Brennan v Irish Pride Bakeries (In receivership) [2017] IECA 107, (Unreported, Court of Appeal (Finlay Geoghegan J; Irvine and Hedigan JJ concurring), the Court of Appeal approved the following passage from the judgment of Laffoy J in Giblin v Irish Life & Permanent plc [2010] ELR 173 (at 184):
‘As a general proposition, in the context of employment injunctions, the jurisprudence of the courts has developed over the last quarter century so that it is generally considered that the prospect of an award of damages following the trial of the action is not an adequate remedy for a successful plaintiff who has been deprived of his salary pending the trial of the action.’
59. The defendants argue that, should an injunction be granted and should they later succeed in their defence to Mr O’Donovan’s claims, his undertaking to pay damages in that event may not adequately compensate them for two reasons; first, because he has not provided sufficient detail of his means to enable the court to assess the extent to which it is realistic for him to fully compensate them; and second, because, they claim, not unreasonably, that their inability to appoint a new CFO is causing them ongoing damage – as averred to in the affidavit sworn on their behalf by Mr Wade, the general manager of Over-C Technology – that may not be easy to quantify.
60. In support of the first reason, the defendants pray in aid the decision of O’Sullivan J in Martin v An Bord Pleanála [2002] 2 IR 655. However, that was not an employment injunction case, nor was it one in which it could have been argued, as it may be here, that any impecuniosity there may be on the part of the applicant has been caused or contributed to by the alleged wrongful conduct of the respondent(s).
61. There is obvious force in the argument that the defendants suffer significant ongoing prejudice through being without a CFO. In view of what is, in all probability, the irretrievable breakdown of the relationship of mutual trust and confidence between the parties, it is highly improbable that Mr O’Donovan will ever resume that role, even if he is entirely successful at the trial of the action. The substantive remedy he seeks is the annulment of the decision to terminate his employment during his probationary period for sub-standard performance. Mr O’Donovan acknowledges that the defendants are nonetheless entitled to terminate his employment on one month’s notice in accordance with the terms of his contract of employment. As is their right, the defendants have chosen to join issue on Mr O’Donovan’s claim that they were not entitled to dismiss him in the manner and circumstances that they did for sub-standard performance. But it is on that issue that I have found that Mr O’Donovan has made out a strong case.
A Fennelly Order
62. With those considerations in mind, I judge that the balance of convenience (that is to say, the least risk of injustice) lies in making a modified form of what has become known as a Fennelly order, after the decision of Costello J in the case of Fennelly v Assicurazioni Generali S.P.A. (1985) 3 ILT 73, (Unreported, High Court (Costello J, ex tempore), 12 March 1985). In its most basic form, that is an interlocutory order directing an employer to pay an employee all salary and other benefits to which the employee is entitled under the relevant contract of employment, on the undertaking of the employee to carry out such duties under that contract as the employer may require.
63. The defendants submitted in the course of argument that a Fennelly order is an exceptional relief that the court should be slow to grant. For my part, I share the view expressed in Kirwan, Injunctions: Law and Practice (2nd edn, 2015) (at 9-206) that ‘given the Fennelly orders evolutionary path, and the way in which subsequent cases followed Fennelly, it can now be said with some confidence that whatever about its status at the time Costello J delivered his judgment [in 1985], it can no longer be considered an exceptional – in either sense of the word – case at all’.
64. On behalf of Mr O’Donovan, Ms Bolger SC invited the court to consider instead an interlocutory injunction directing the defendants to conduct a fresh assessment of Mr O’Donovan’s performance during the probationary period in a manner consistent with his entitlement to fair procedures or, alternatively, directing that Mr O’Donovan’s appeal against the existing adverse assessment must proceed. In my judgment that would be inappropriate. It would alter, rather than preserve, the status quo pending trial. More significantly, it would involve prejudging what is likely to be a central – if not the central – issue at trial, namely, whether Mr O’Donovan’s dismissal was indeed effected in breach of his contractual entitlement to fair procedures. In addition, in the absence of the necessary determination at trial concerning the nature and extent of that entitlement, if it is found to exist, any such order would be difficult, if not impossible, to police.
65. It should not be necessary to reiterate that, in dealing with the present interlocutory application, I am not purporting to finally decide any of the legal or factual issues in controversy between the parties in the action. As Hardiman J observed in Dunne v Dun Laoghaire-Rathdown County Council [2003] 1 IR 567 (at 581), on a full hearing the evidence may be different and more ample and the law will be debated at greater length.
Summary
66. In my judgment, Mr O’Donovan has established a strong case that he had an implied contractual right to fair procedures in the assessment of his performance during his probationary period, which right was breached in the manner and circumstances of both the decision on 7 January to summarily dismiss him for sub-standard performance and the decision on 17 January to deem his appeal against that decision to have been withdrawn.
67. I am satisfied that the balance of convenience or, differently put, the least risk of injustice favours the making of a Fennelly order in the following terms:
(1) That the defendants are restrained from repudiating Mr O’Donovan’s contract of employment pending the trial of the action on the following specific terms:
(i) That Mr O’Donovan is to be paid his salary for a period of six months from the end of January 2020 (and any applicable bonus and other benefit arising during that period), on the provision by him of an undertaking to carry out any of the duties of CFO that the defendants may require of him.
(ii) That the defendants are not required to assign any of the duties of CFO to Mr O’Donovan at any time pending the trial of the action but, insofar as they do beyond the period of six months from the end of January 2020 and pending the trial of the action, must pay his salary (and any applicable bonus and other benefit) accordingly.
(iii) That the defendants may choose to put Mr O’Donovan on leave of absence rather than assign any duties to him, but that is without any prejudice to their obligation at (i) above.
(iv) That the defendants are released from their undertaking not to replace Mr O’Donovan by the appointment of a new CFO and may do so as they see fit.
68. I have fixed the period during which the defendants must pay Mr O’Donovan’s salary as one of six months, rather than the entire period pending trial, because, in light of Mr O’Donovan’s acknowledgment that the relationship of mutual trust and confidence between the parties has irretrievably broken down, his claim is, in reality, one for a fair termination process rather than for reinstatement in the role of CFO. It is also significant that, as Carroll J noted in Orr v Zomax Ltd [2004] IEHC 47, (Unreported, High Court, 25 March 2004) (at para. 58), on appeal to the Supreme Court in Fennelly, payment of salary was limited to six months.
Final matters
69. On 24 March 2020, the Chief Justice and Presidents of each court jurisdiction issued a joint statement recording their agreement that, in light of the COVID-19 pandemic and the need to minimise the exposure of persons using the courts to unnecessary risk, the default position until further notice is that written judgments are to be delivered electronically and posted as soon as possible on the Courts Service website. The statement continues:
‘The parties will be invited to communicate electronically with the Court on issues arising (if any) out of the judgment such as the precise form of order which requires to be made or questions concerning costs. If there are such issues and the parties do not agree in this regard concise written submissions should be filed electronically with the Office of the Court within 14 days of deliver subject to any other direction given in the judgment. Unless the interests of justice require an oral hearing to resolve such matters then any issues thereby arising will be dealt with remotely and any ruling which the Court is required to make will also be published on the website and will include a synopsis of the relevant submissions made where appropriate.’
70. Thus, I direct the parties to correspond with each other to strive for agreement on any issue arising from this judgment, including the issue of costs. In the event of any disagreement, short written submissions should be filed in the Central Office of the High Court within 14 days, to enable the court to adjudicate upon it.
Carvill v. Irish Industrial Bank Ltd.
[1968] IR 325
Kenny J. 338
Supreme Court.
O’DALAIGHC.J. :
29 July
I have read the judgment of Mr. Justice O’Keeffe and I agree with it.
LAVERY J. :
I agree.
HAUGH J. :
I agree.
WALSH J. :
I agree.
O’KEEFFE J. :
This appeal is brought by the plaintiff from the order of the High Court dismissing his claim for declarations as to his position as managing director of the defendant company, together with ancillary relief, or alternatively for damages for wrongful dismissal. With the plaintiff’s appeal there was heard a cross-appeal by the defendants, details of which I need not mention here, but to which I must refer from time to time through the course of this judgment. The defendant company, then called the Erne Trust Company Limited, was incorporated on the 4th May, 1953. Its name was changed in the year 1957 to Irish Industrial Bank Limited. The plaintiff was one of the first directors of the company, and remained a director until the 6th July, 1961, when by resolution of the company in general meeting he was removed from office.
In his statement of claim the plaintiff alleged that he was managing director of the company, and this was not denied by the defendants. Mr. Justice Kenny held that the plaintiff was not the managing director of the company, but that he was a director and also a salaried employee of the company. At the trial the defendants had applied for leave to amend their defence by inserting, at the beginning of para 5 of the defence, the following plea:”The defendant admits that the plaintiff was employed as managing director but denies that he was so employed from year to year or for any fixed or definite term and further denies that such employment was at the salary and emoluments mentioned in the statement of claim. The defendant further denies that the plaintiff was employed under any contract, express or implied. If (which is denied) the plaintiff was employed under any contract, it was not an implied term or condition of the said contract or employment that the said employment of the plaintiff should be determinable by the defendant company only by reasonable notice to the plaintiff or that the plaintiff should be entitled to continue in such employment until the expiration of such notice.” Leave to make this amendment was refused, and from this refusal the defendants have appealed in their cross-appeal. It appears to me that this amendment was necessary to enable the real dispute between the parties to be decided, and that it should have been allowed although, for the reasons which I set out hereafter, the amendment may not materially affect the result of the proceedings.
The finding of Mr. Justice Kenny, that the plaintiff was not managing director of the company, appears to me to be neither in accord with the pleadings nor in accord with the facts as adduced in evidence. The reasons for this view are as follows.
Article 106 of the articles of association of the company provided that the directors may from time to time appoint one or more of their body to be managing director or managing directors, or to discharge any technical, advisory or other special duties (such persons to be called “Special Directors”), and either for a fixed term or without any limitation as to the period for which he or they is or are to hold any such office and may from time to time remove or dismiss him or them from office and appoint another or others in his or their place or places. Article 107 provides as follows:”A Special Director shall not, while he continues to hold that office, be subject to retirement by rotation and he shall not be taken into account in determining the rotation by retirement of directors, but he shall (subject to the provisions of any contract between him and the company) be subject to the same provisions as to resignation and removal as the other directors of the company, and if he cease to hold the office of director from any cause he shall ipso facto, and immediately, cease to be a Special Director.”
There is no evidence of a formal appointment of the plaintiff as managing director by resolution of the board, but there was evidence that he had acted as such and had described himself and had been described by the defendants as such, and had received remuneration from the defendants appropriate to the position of managing director. The resolutions put in evidence fixing the remuneration of the plaintiff did not in terms describe him as managing director, but a resolution of the board passed on 6th July, 1961, purported to remove him from office as managing director and to appoint a new managing director in his stead. I take the view that, if there is compelling evidence of a consensus of opinion among the directors, a formal resolution need not be proved in order to justify a finding in accordance with that consensus, of opinion. In the present case, I consider that it is clearly established by the evidence that the plaintiff was regarded by his co-directors as appointed to the office of managing director, and that he should be held to be validly appointed to that office, even though no formal resolution appointing him appears among the minutes of the meetings of the board of directors. Not only is this in accordance with the facts, but it is, I think, the case which both the plaintiff and the defendants wished to make on their respective pleadings.
The real dispute between the plaintiff and the defendants is not as to whether the plaintiff was a managing director, but as to the terms upon which he held that office. The plaintiff alleges that one of the terms of his appointment as such was that he should not be removed from office save on notice of not less than twelve months duration, while the defendants allege that the plaintiff could be removed from office at any time. Each party in turn relies upon Article 107 of the articles of association. The plaintiff says that the provisions in that Article were expressed to be subject to his contract with the company, and that that contract required notice of not less than twelve months to determine it. The defendants say that there was no contract or, alternatively, that there was no contract which required any notice; and they say that, on his ceasing to be a director, the plaintiff automatically ceased to hold his position as managing director.
Reference was made to a number of authorities. On the one hand reliance was placed on such cases as Nelson v.James Nelson and Sons Ltd. (1), Southern Foundries (1926)Ltd. v. Shirlaw (2), and Shindler v. Northern Raincoat Co. Ltd. (3) where it was held that a company which had appointed a managing director for a fixed term could not, without being liable for damages for breach of contract, put an end to his employment as managing director during that term, even by altering its articles of association. On the other hand reference was made to Read v. Astoria Garage (Streatham) Ltd. (4) in which the plaintiff had been appointed managing director at a salary of £7 per week, which salary was later increased. He continued in office for many years, but finally it was resolved by the directors that his employment be terminated, and he was given a month’s notice. His salary was paid for approximately four months. He brought an action for wrongful dismissal on the ground that he had not been given reasonable notice. Article 68 of Table “A” to the Companies Act, 1929, applied to the company. That Article provided:”The directors may from time to time appoint one or more of their body to the office of managing director or manager for such term and at such remuneration
(whether by way of salary, or commission, or participation in profits, or partly in one way and partly in another) as they may think fit, and a director so appointed shall not, while holding that office, be subject to retirement by rotation, or taken into account in determining the rotation or retirement of directors; but his appointment shall be subject to determination ipso facto if he ceases from any cause to be a director, or if the company in general meeting resolve that his tenure of the office of managing director or manager be determined.” Harman J. held that, on an article of association in that form, it was not open to the directors to appoint a managing director on terms which would deprive the company of its power to revoke the appointment ipso factoby removing the director from his office. This decision was upheld by the Court of Appeal, which distinguished the Southern Foundries Case (1) on two grounds, first, that in that case there was a contract of service between the company and the managing director dehors the articles of association and, secondly, the contract was sought to be determined by a power which was not present in the articles of association of the company as they stood at the date of the contract, but which had been inserted in the articles by subsequent alteration.
In Shindler’s Case (2), Diplock J. (as he then was) regarded himself bound by the decision in the Southern Foundries Case (1) and considered that Harman J. had arrived at a decision which could not be reconciled with that earlier decision. In the present case it is not necessary to decide whether Diplock J., was correct in this. The articles which was construed in Read v. Astoria Garage (Streatham) Ltd. (3)did not contain the important phrase “subject to the provisions of any contract between him and the company”which appear in Article 107 of the articles of association of the defendant company, and these words make an important difference. Once these words appear, it is open to the directors to enter into a contract with the managing director the effect of which may be to deprive the company in general meeting of the power to remove him from office without being liable to pay damages. The question is whether there is such a contract in the present case.
It appears to me that a person who is a director, and who is appointed by the board of directors to the office of managing director, must be deemed to hold that office under some contract, either express or implied. The contract may be for a fixed term, in which case it cannot properly be terminated before the expiration of that term without a liability to pay damages. It may be for no fixed term and, indeed, may be for so long only as the person holds office as director, in which case, if the person concerned ceases to be a director, his office as managing director also comes to an end. An express contract might well provide that the office could be held without limitation as to term, but with a provision for notice to determine it, and in that case there would be implied a term that, until the proper notice had been given, the person concerned would not be removed from the position of director so as to bring his appointment as managing director to an end.
What were the terms of the plaintiff’s contract in the present case? He must be considered to have been appointed shortly after the formation of the company. The first record we have of his remuneration being fixed is in the minutes of the meeting of directors held on the 27th April, 1955, when it was resolved that the plaintiff’s salary be fixed at £1,750 p.a. for the period of one year from the 1st October, 1954, such amount to be payable monthly. On the 8th May, 1956, the board approved the plaintiff’s salary at £2,000 for the year ensuing as from the 1st October, 1955. The last resolution recorded in the minutes and relating to his salary was passed on the 21st March, 1957, and is as follows:”That the salary of Mr. Michael Carvill be fixed at £2,000 per annum payable monthly for the year ensuing as from 1st November, 1956, plus a commission of 2% on the net profits of the Company as shown in the audited Accounts before any provision is made for Income Tax or Company Tax but after charging the said salary and commission.” There is no record of any decision to continue the plaintiff’s salary at this rate after the end of the year to which this entry refers, viz. from the 1st November, 1957, but the plaintiff continued to receive a salary of £2,000 p.a. and no attempt has been made to suggest he was not entitled to this. I think it fair to regard the salary as continued by consensus of the board of directors without any formal resolution to that effect. The plaintiff says that towards the end of 1959 he had a conversation in Nottingham with Mr. Stanley Keywood, another director, when the plaintiff was told that he should receive a further £500 p.a. (though not apparently in addition to 2% of the profits), and he says that as from that time he was paid his salary of £2,000 p.a. monthly and that he drew against the additional £500 from time to time. I do not regard this increase as shown to have been arrived at by any consensus of the directors, and I think that his salary must, on the evidence as it stands, be regarded as remaining at £2,000 p.a., with a percentage of profits. I then find a situation in which the plaintiff is appointed managing director and his salary is fixed on a yearly basis and, while the figure is altered by increasing it first to £2,000 and then to £2,000 with a percentage of profits, it remains fixed on a yearly basis. I think that the plaintiff must be regarded as employed under a contract from year to year as managing director, and that it must be implied also that such contract could not be determined without such notice as is appropriate to an engagement of the kind mentioned. The trial judge considered that a year’s notice (or salary in lieu of notice) was appropriate, and the defendants have not submitted that such length of notice was excessive, although they have contended that no notice at all was required. In the circumstances I see no reason for disturbing the finding of the trial judge that the appropriate period of notice was a year, although I might not myself have fixed so long a period. I think, however, that the salary payable during the period of notice would be £2,000 p.a., not £2,500 p.a. If the plaintiff is entitled to damages this is the figure which I would award.
The plaintiff was dismissed summarily, and no reason was assigned at the time. The defendants subsequently sought to justify the dismissal on the ground that the plaintiff misconducted himself in his employment before his removal and that he was discharged because of this. Particulars of the misconduct were sought, and they were furnished by letters dated the 28th October, 1963, and the 21st January, 1964. The particulars of misconduct were given as follows:”4. The defendants maintain that the plaintiff’s management of the affairs of the Company was incompetent and in particular the following matters appeared to the Board to be extremely unsatisfactory . . .” There followed particulars of twelve matters which the defendants wished to question. These matters were dealt with at the trial and the trial judge found, in respect of all except one, that they would not justify the plaintiff’s summary dismissal. He found against the plaintiff on that one, and because of this he held that the plaintiff was lawfully dismissed summarily, and did not award him any damages for wrongful dismissal.
The plaintiff has appealed against the finding of the trial judge on the last-mentioned item, and the defendants cross appealed against the findings of the trial judge in relation to the other eleven items. At the hearing of the appeal the defendants confined their submissions to five of the twelve items.
As I have already said, no reason for the plaintiff’s summary dismissal was assigned at the time, but the defendants sought to justify the dismissal on the grounds of “misconduct”and gave particulars of this alleged misconduct, and gave evidence in support of their plea. There was no evidence that at the time of the dismissal any of the matters complained of subsequently were within the knowledge of the defendants, but the defendants relied upon the statement of the law contained in text books to the effect that it is not necessary that a master, dismissing a servant for good cause, should state the ground for such dismissal; and that, provided good ground existed in fact, it is immaterial whether or not it was known to the employer at the time of the dismissal. Counsel for the plaintiff submitted that this statement of the law was erroneous, and this point was fully argued by both sides. The plaintiff’s counsel submitted that, while a master need not assign any ground for the summary dismissal of a servant, he could not later justify the dismissal on a ground which was not within his knowledge at the time of the dismissal. Support for this view is to be found in the judgment of Parke B. in Cussons v. Skinner (1)at p. 172 of the report where he says:”. . . it would be necessary for the defendants, who justify the discharge, to shew that at the time the discharge took place in January, 1841, they knew at least of this act of misconduct.”Support for the proposition relied upon by the defendants and stated in the text books, is to be found in a number of cases but particularly in the judgment of Cotton L.J. in Boston Deep Sea Fishing & Ice Co. v. Ansell (2). The Court was referred to the statement of the law in Smith on Master and Servant and it appears that, in the first and second editions, the author considered that a master could not rely on an act of misconduct to justify a dismissal unless he at least knew of the act at the time of the dismissal; but that in the third edition (published in 1870) and in later editions of the work the author considered that a master might rely on an act of misconduct to justify a dismissal even if he did not know of it at the time of the dismissal.
In principle it is difficult to understand how an act can be relied upon to justify a dismissal unless it is known at the time of the dismissal. It must be conceded that there can be some breaches of contract so fundamental as to show that the contract is entirely repudiated by the party committing them, and that such an act might be relied upon in an action for wrongful dismissal, not as justifying the dismissal, but as supporting a plea that the dismissed servant had himself put an end to the contract. Where the act is not of so fundamental a character but would warrant the dismissal of the servant at the option of the employer, it appears to me to be quite illogical to say that an employer may be heard to say that he dismissed his servant on a ground unknown to him at the actual time of dismissal. This is the reasoning of Lord Abinger C.B. in Cussons v. Skinner (1) at page 168 of the report where he says:”This plea alleges disobedience to be the cause of the plaintiff’s discharge. What act of disobedience is shewn in this case, excepting the act alleged, which is said to be proved by the plaintiff’s own letter? But it is admitted by the counsel on both sides, that the defendants never discovered that act till after they discharged him. How, then, can they urge that that was the cause of his discharge? It is agreed that the plea could only be sustained by evidence that that was the cause of his discharge. If the defendants knew it before, and passed it over, and allowed the plaintiff to remain to the 1st of August, he would still be entitled to all his wages up to that time. If the defendants did not know it, it clearly was not the cause of his discharge.” I should mention that in Boland v. Dublin Corporation (2), where the question of wrongful dismissal was discussed incidentally in the Supreme Court, the case of Cussons v. Skinner (1)appears not to have been mentioned in the course of the argument.
In my opinion, therefore, an employer cannot, as a defence to an action for wrongful dismissal, rely on an act of misconduct on the part of his servant which was unknown to him at the time of the dismissal, unless the act is of so fundamental a character as to show a repudiation of the contract of employment by the servant. This does not mean that the employer is without rights in respect of the misconduct. He can, in my view, rely on it as a ground for reduction of damages, and in a proper case the result may be to reduce the damages to the point of extinction.
[His Lordship referred to four of the five allegations of misconduct upon which the defendants relied in support of their cross-appeal and, having expressed his agreement with the findings of Kenny J. with regard to those four allegations, continued as follows:]
I now come to the carpet transaction. I have to examine this transaction in some detail, though I need not repeat all the facts. Counsel for the plaintiff have relied strongly on the fact that fraud or dishonesty on the part of the plaintiff was not pleaded and in my opinion this is so, if one is to have regard to the nature of the fraud or dishonesty which the evidence was tendered to establish. When particulars in relation to this matter were furnished they were as follows:”In April, 1961, a carpet was supplied to the plaintiff’s house by Messrs. Strahan & Co. together with an underfelt and an old carpet from the plaintiff’s house was fitted in the defendants’ premises at a total cost of £129 15s. 0d. Part of this sum (£90) was charged to the defendants. This was done without the knowledge or consent of the board of the defendant company.” The complaint made is apparently that the plaintiff did not disclose his financial interest in the transaction. No complaint is made in the particulars that what the defendants obtained was worth less than the £90 paid for it. The failure to disclose his interest to his co-directors was a rather trivial matter, and would not warrant his dismissal, but at the trial the defendants put forward a case in excess of that covered by the particulars, and alleged in effect that the company had been defrauded by charging it with an amount greatly in excess of the value of the second-hand carpet. I do not think that this should have been permitted. If fraud is to be relied on, it must always be clearly pleaded and clearly established. Here it was not, in my view, pleaded at all. Furthermore, the evidence to establish it was unsatisfactory. The carpet was fitted early in 1961. Mr. Gillespie, of Strahan & Co., had looked at it for the purpose of the case sometime between the 28th and the 31st January, 1964. When he was asked what its highest value was in April, 1961, he said:”Well, it would be difficult to say in so far as I did not pay particular attention to it then. I would imagine possibly £30 to £35.”
This is obviously not the considered opinion of an expert to be relied upon as bringing home to the plaintiff the fraud which the defendants sought to impute to him, but an opinion casually given to a question for which the witness was, apparently, quite unprepared. Even if fraud were properly pleaded, I would be reluctant to convict the plaintiff on such evidence. In the result I find myself at variance with the trial judge in respect of this transaction, and I would not regard the defendants as having established in respect of it a ground for dismissing the plaintiff.
It follows that even had all these matters been within the knowledge of the defendants at the time of the dismissal, they have failed to make out a sufficient case to warrant the summary dismissal of the plaintiff and accordingly the plaintiff is, in my view, entitled to damages for wrongful dismissal. I have already indicated that the amount should be £2,000 and not £2,500.
Glover v. B.L.N. Ltd. (No. 2)
[1973] IR 432
Kenny J. 432
Mr. Glover claims damages for the wrongful termination of his contract under six heads. First, he claims £3,750 as the amount of his salary for 20 months. Secondly, he claims £416 16s. 8d. as expenses for the same period; he was entitled to a yearly sum of £250 for expenses under his contract. Thirdly, he claims £600 for two years director’s fees for the subsidiary companies. Fourthly, he claims £833 13s. 0d. for the loss of the use of the car which was made available to him under his contract. Fifthly, he claims £859 8s. 0d. as the commission certified by the auditors. Sixthly, he claims £4,701 as the surrender value on the 31st March, 1968, of the policy of assurance which had been issued for him under the Irish Pension Trust retirement benefit scheme and for which he had not to make any payments.
He cannot recover anything for the expenses. As his contract was terminated, he could not have had any expenses in connection with his office; in my view, the yearly sum of £250 was intended to reimburse him for those which he would have had to incur. I have been invited to have regard to the fact that those who are entitled to expense accounts make some profit out of them. I decline to do this.
Clause 8 of the contract reads:” “Mr. Glover shall be entitled during the continuance of this agreement to be supplied with and to have the use of a motor car for all purposes and all expenses of up-keep, taxation, and insurance and petrol in respect of the said motor car shall be borne by the operating company and/or the sales company and/or the factors company.” Mr. Glover valued this right at £500 p.a. The defendants did not give any evidence about this. I think that this figure is reasonable and I will allow it.
Mr. Wood has said that I should award nominal damages only because Mr. Glover did not sustain any loss as a result of the failure of the directors of the holding company to hear his answer to the charges against him. He submitted that the Court has decided that Mr. Glover committed serious misconduct which injuriously affected the reputation, business, property and management of the operating company; and he submitted that, if the directors had heard Mr. Glover, they would have come to this conclusion and so would have been justified in terminating his contract immediately. I have already dealt with this argument in the judgment11 which I gave on the 31st July. I do not know what conclusions the directors would have reached if they had heard Mr. Glover and I decline to speculate as to whether their decision would have been unanimous. I think that Mr. Duggan and Mr. Hogan would have favoured a resolution that Mr. Glover should be allowed to retain his pension rights if he had offered to resign immediately.
Mr. Wood’s next argument was that the obligations in connection with the assurance policy and the pension which it was intended to provide were between Mr. Glover and the operating company whose board of directors were not obliged to hear him before he was dismissed. Therefore, said Mr. Wood, the termination of the contract between Mr. Glover and the operating company was not a breach of contract and nothing is payable for the loss of benefits secured by the scheme. However, the operating company was one of the parties to the agreement of the 10th January, 1964, by which it appointed Mr. Glover to be a technical director, and clause 12 of the agreement begins with the words:” “Mr. Glover’s appointment as technical adviser of all the companies may be terminated . . .” He could be removed from this position under this clause only and the operating company were not entitled, in my opinion, to dismiss him unless he had been given a hearing by the holding company. Mr. Glover’s right to recover damages for this head is not affected by the position that his pension rights were against the operating company only.
The next submission was that rule 17 of the general rules governing the pension scheme had the effect that no damages could be recovered for the loss of benefit under it. The heading to this rule reads:” “Employer’s right to discharge employees” and the rule is:” “Membership of the scheme shall not in any way restrict the right of the employer to discharge any of his employees and the benefits provided under the scheme shall not be made the grounds for increasing a claim for damages in any action brought by a member against his employer.” Clause 3 of the declaration of trust executed by the trust company provided:””The assurances shall be held by the trustee upon the following trusts, that is to say . . . (e) in the event of the employment being terminated by the employer before normal pension date for any reason other than fraud or misconduct then for the member; (f) in the event of the member being discharged from the employment before normal pension date for fraud or misconduct (as to which a certificate by the employer shall be conclusive) then as the employer shall decide.” As Mr. Glover was not lawfully discharged for fraud or misconduct, sub-clause (e) applied and he had a vested right in the policy of assurance when his contract was terminated. The trust company were the trustees and Mr. Glover was the beneficiary. He was entitled to retain his position until the 31st March, 1968, and, if his employment was not continued, he could have taken the surrender value of the policy. A rule which is intended to deprive anyone of a vested right must be so worded that this result is clear. I think that the rule means that the employee who has been discharged cannot include future benefits under the scheme as part of his damages if his dismissal was not lawful. It had not the effect of taking away Mr. Glover’s vested rights in the policy.
The next contention was that, when calculating that part of the damages referable to loss of salary, director’s fees and commission, I should make a deduction for the income tax and surtax which Mr. Glover would have had to pay on these if he had remained in the defendants’ employment until the 31st March, 1968. In support of this, the decision of the House of Lords in British Transport Commission v.Gourley 12 was cited; while Mr. Glover’s counsel invited me to hold that that case had been wrongly decided and that it should not be followed in this country. Although it was decided in 1955 and although the rule which it established in England and Scotland must have applied to many assessments of damages for personal injuries and for breaches of contracts of employment in this country since then, I was informed by counsel (all of whom have considerable experience of claims arising out of motor-car accidents) that its application in Ireland has never been considered. Mr. Lardner has argued that it has never been the practice of the Irish Courts to make a deduction from damages awarded for loss of earnings and that Gourley’s Case 12 had not changed this. The assessment of damages, however, should not be regulated by practice but by principles of law based on logic and good sense. I do not accept the view that a practice, however hallowed it may be, can give rise to a rule of law.
In Gourley’s Case 12 the House of Lords by a majority of 6-1 decided that, when the damages to which a plaintiff is entitled for personal injuries include a sum for loss of future earnings and when that sum is not chargeable to income tax or surtax, a deduction must be made for the tax which the plaintiff would have had to pay if he had received the earnings in the future. Income tax and surtax, it was said, are so much a feature of modern life that it would be unreal to ignore them in computing damages. In that case counsel conceded that the damages referable to the loss of earnings were not chargeable to tax. It has, however, been decided in many cases since 1955 that the rule does not apply if the sum awarded is chargeable to tax or has to be taken into account in computing profits: see Morahan v.Archer 13 and the cases referred to by Sellers L.J. in his dissenting judgment in Parsons v. B.N.M. Laboratories Ltd. 14 Sections 8 and 9 of the Finance Act, 1964 (see now ss. 114 and 115 of the Income Tax Act, 1967) have the effect that amounts exceeding £3,000 awarded for damages for wrongful dismissal are taxable.15 The first question which arises, therefore, is whether the damages for loss of earnings, fees and commission in this case are, apart from ss. 8 and 9 of the Act of 1964, chargeable to tax.
In an action for wrongful dismissal, the damages are not an award of the remuneration which would have been earned: they are intended to compensate the plaintiff because he has not been allowed to earn it. “It has long been well settled that, if a man employed under a contract of personal service is wrongfully dismissed, he has no claim for remuneration due under the contract after the repudiation. His only money claim is for damages for having been prevented from earning his remuneration.” ”per Salmon L.J. in Denmark Productions Ltd. v. Boscobel Productions Ltd. 16 This is the justification in principle for the many decisions in which judges have said that damages for wrongful dismissal are not taxable. In the first of these, Chibbett v. Joseph Robinson & Sons 17, Rowlatt J. said that damages for wrongful dismissal, and voluntary payments made in respect of the termination of contracts of employment which had some time to run, were not taxable profits. Similar views were expressed in du Cros v. Ryall 18, in Carter v. Wadman 19 and by the Master of the Rolls in Henley v. Murray. 20 In the last of these cases Somervell L.J. said:” “It is conceded by the Crown that in a case where damages for wrongful dismissal are sued for, the sum awarded as damages is not only not within the sched. E but, also, is not taxable as income under any other schedule.” The measure of the damages may be the amount of the remuneration but that does not make them taxable. In so far as the damages in this case consist of a sum calculated by reference to salary, commission and director’s fees, they are not taxable in Mr. Glover’s hands, apart from ss. 8 and 9 of the Act of 1964.
The next question is whether ss. 8 and 9 of the Act of 1964 have made the damages, in so far as they relate to salary, director’s fees and commission, chargeable to tax or whether so much of them as exceeds £3,000 only is taxable. [The judge referred to those portions of ss. 8 and9 which appear at p. 433, and continued . . .] The definition of payment of compensation for loss of office in para. 13 of the first schedule to the Act of 1964 (which deals with relief in respect of tax imposed under s. 8) shows that damages for wrongful dismissal are chargeable under s. 8 of that Act. In my view, when the amount of the damages for loss of remuneration exceeds the sum mentioned in s. 9, the first £3,000 is not chargeable to tax. It follows that £3,000 of the damages in this case, insofar as they relate to loss of salary, commission and fees, are not liable to tax under sections 8 and 9.
The next argument was that Gourley’s Case 21 applies only to the damages awarded for loss of remuneration in accident cases and not to those given for wrongful dismissal. It was conceded that the system of deduction of tax at the source, introduced by the Finance (No. 2) Act, 1959 (popularly known as the P.A.Y.E. system), did not affect the problem whether an allowance should be made against the damages for income tax and surtax which would have had to be paid on the earnings if they had been received. The payment made by the employer to the Revenue of the tax which he has deducted from earnings assessable under Schedule E is made to them on behalf of the taxpayer. But if the damages representing loss of remuneration are to be reduced by the estimated amount which the injured party would have had to pay in taxation in accident cases, it is impossible to understand why a different rule should be applied to those payable in a claim for wrongful dismissal because in each case the damages are compensation for being deprived of the opportunity to earn. This suggested distinction would create a wholly illogical rule. It does not assist Mr. Glover’s case to say that he has a legal right to the full salary payable under his contract, because the Act of 1959 has already provided for a deduction for tax and so has interfered with this. Moreover, the majority of the members of the House of Lords who decided Gourley’s Case 22 held that the principle applied to damages awarded for wrongful dismissal, and in four subsequent cases the restriction of the rule to damages awarded in accident cases was rejected: Beach v.Reed Corrugated Cases 23; In re Houghton Main Collieries Co. 24; Parsons v. B.N.M. Laboratories Ltd. 25 and Bold v.Brough, Nicholson & Hall Ltd. 26 In my opinion the principle (if valid) applies to damages for loss of remuneration in claims for breach of contract and for legal wrongs.
And so arises the most formidable question in this very difficult case. Was Gourley’s Case 22 correctly decided? The reasoning of the majority was that the injured person would have had to pay income tax and surtax on the earnings if he had got them, that income tax is a feature of the modern State which affects many of its citizens, and that the law cannot ignore its existence without involving itself in absurdity. Therefore, the damages should be reduced by the estimated amount of tax which the injured party would have had to pay on the earnings if he had got them; if this is not done, he will get by way of damages much more than if he had got the remuneration. Against the rule it has been said that the defendant cannot be made liable to pay to the Revenue the amount of tax which has been deducted from the damages and so the person who wrongfully terminates a contract or who drives his motor car negligently and so causes injuries profits at the expense of the other party. It is also urged that the estimate of the income tax and surtax which the plaintiff would have had to pay will, in many cases, be inaccurate and may work injustice to the plaintiff. Our tax legislation gives an example of this: in the case of a person who was earning £4,000 p.a. or more and who had the misfortune to be involved in an accident in 1965 and to have had his damages assessed in February, 1967, the estimates of the amount of surtax payable by him would have been made grossly inaccurate by s. 10 of the Finance Act, 1967, and the extension of that relief by the Finance Act, 1968. It is also said that the rule leads to the type of calculations which are not appropriate to a court of law (see Stewartv. Glentaggart Ltd .27) and for the difficulties see Vol. 3 of Simon on Income Tax (1966 ed. paras. 121-130). I have had the advantage of reading the Seventh Report of the Law Reform Committee in England dealing with the effect of tax liability on damages (Cmnd. 501) which is a document remarkable for the eminence of those who signed it and for the diversity of their views. The last paragraph of the report, written in 1958, is significant:” “We would conclude this report by saying that it may turn out that the difficulties to which the law gives rise in practice are greater than some of us are at present disposed to believe and we are, therefore, agreed in thinking that it may well become desirable to review the practical implications of the decision in Gourley’s Case 28 after a further lapse of time.”
An award of damages by a court is intended to compensate the plaintiff for the loss which he has suffered: in some cases the damages may be punitive but compensation or restoration (so far as money can do it) to the position before the accident is the main element. Therefore, it is irrelevant that the defendant will profit by an allowance being made for tax against the loss. If the damages under £3,000 are not chargeable to tax while the lost remuneration would have been, the plaintiff would be getting an award which would exceed the loss which he had suffered by being deprived of the remuneration. Income tax enters into the economic lives of so many of our citizens that the law cannot ignore it when assessing damages. The estimate of the taxation which the plaintiff would have had to pay on the earnings which he would have got if he had not been injured or if his contract had not been broken must necessarily be inaccurate but in a period of inflation
and increasing taxation it will, in most cases, be less than the tax which would have been payable. In personal injury cases the medical witnesses cannot be precise in their prophecies about the effects of the accident but despite this the Courts have to give awards to compensate for what are scientific and medical uncertainties. In some cases the calculation of the tax which would have been payable may be difficult and may present great problems to juries, but these are no greater than those created by the daily disagreements between eminent medical witnesses.
In my opinion, the rule adopted by the majority in Gourley’s Case 29 accords with reason and principle and should be applied to the first £3,000 of the damages for loss of salary, fees and commission in this case. The amount of the income tax which would have been payable by Mr. Glover has been agreed at £1,050 and so there will be judgment for £9,694.
Hickey & Co. Ltd v Roches Stores (Dublin) Ltd
1975 No. 1007P
High Court
1 May 1980
[1980] I.L.R.M. 107
(Finlay P)
delivered his judgment on 1 May 1980 saying: This is a claim brought by the plaintiffs for damages for breach by the defendants of a contract. The contract, which was made in writing in the month of March 1969, was a trading agreement under which the plaintiffs, who are well known wholesalers and retailers of fashion fabrics, entered into an agreement to retail those fabrics in the premises of the defendants, who are well known department store proprietors in Henry Street in Dublin, on a profit-sharing basis.
The agreement provided a method of termination by either party with detailed provisions for the payment of compensation; the length of notice; and the giving of an undertaking on the part of the defendants after termination of the contract not to engage in the sale of fashion fabrics other than household and furniture fabrics for a period of twelve months. The agreement also contained a liberty to the defendants under certain specified circumstances to terminate on less than six months notice without compensation and without an undertaking. It was a further term of the agreement that in the event of a dispute concerning the right of the defendants to terminate in the last mentioned manner that the matter should be submitted to arbitration by the parties.
The defendants by a notice dated 17 December 1971 purported to terminate the trading agreement as and from 2 February 1972 without compensation and without any undertaking on their part. A dispute then arose between the parties and it was submitted to the arbitration of senior counsel who found that the termination in that form had been unjustified and constituted a breach of the contract and that the termination should have consisted of a notice terminating six months after the date upon which it was served and should have been accompanied *110 by an undertaking given and performed on the part of the defendants not to sell fashion fabrics for a period of 12 months after the expiry of that six month period.
These proceedings were then instituted by plenary summons and after the pleadings had been closed by order of 2 March 1976 a preliminary issue was set down by consent between the parties to determine as between two contending submissions the principles upon which damages should be assessed. I heard that issue and delivered judgment in it on 14 July 1976.
The effect of that judgment was that the plaintiffs were entitled to damages under the following headings:
1. The loss of profits sustained by the plaintiffs by reason of the fact that they had to give up trading in the defendants premises from 2 February 1972 when they were entitled to require notice expiring on 17 June 1972.
2. Any loss caused to the plaintiffs by the fact that the defendants continued trading in fashion fabrics in the defendants’ premises from 17 June 1972 to 16 June 1973.
3. The loss suffered by the plaintiffs by reason of the fact that after the period of 12 months up to 16 June 1973 had elapsed they were still selling fashion fabrics, particularly in the area closely adjoining Henry Street, against a competition which consisted of the defendants with the benefit of the goodwill which had been built up during the period of the joint enterprise between the plaintiffs and the defendants and which had not been interrupted by the period from June 1972 to June 1973.
4. Against the sums arising under these three headings I decided that credit would have to be given by the plaintiffs for any mitigation in their loss effected by them by trading in alternative premises or trading elsewhere.
After the delivery of that judgment the parties apparently made lengthy efforts to negotiate agreement on the figures and exchanged information between accountants. These negotiations did not lead to any agreement and accordingly the matter was re-entered for further hearing by me. It came on on 15 April 1980 and was at hearing for five days and I reserved judgment.
On this hearing the claim as presented by the plaintiffs was divided into the three categories indicated by me in my judgment of July 1976 and they were referred to, and I will hereinafter refer to them, as Claim A, Claim B and Claim C. In addition to extensive issues of fact arising on those claims, two issues of law also arose. The plaintiffs claimed that the appropriate and proper measures of damages for the breach by the defendants of this contract consisting of the figures properly ascertained under three headings set out by me and expressed in terms of the currency at the time each loss was sustained, upon which it was submitted I should operate a factor for inflation so as to bring back each of the figures up to the appropriate buying power of money now at the date of the judgment. That issue, as an issue of law, was contested by the defendants. The defendants on the other hand contended that, having arrived at the appropriate figures for loss under the headings which I have indicated, I should deduct from them a figure which would be equivalent to the corporation profits tax and income tax which the plaintiffs would have paid upon such monies had they earned them. *111 That, as a matter of law was contested by the plaintiffs.
I intend in this judgment to deal with the issues of fact under the three claims and to set out my decision in the terms of the currency at the time when each of the losses was incurred, then to deal with the question as to whether as a matter of law on the facts in this case the plaintiffs are entitled to an upward adjustment of those figures by reason of inflation on the one hand, and whether on the other hand the defendants are entitled to a deduction from those figures by reason of the incidences of corporation profits tax and income tax.
Claim A: Loss of profits between 2 February 1972 and 17 June 1972
Upon the termination by the defendants of their trading agreement on 2 February 1972 the plaintiffs entered into an agreement with Messrs. Penneys Ltd store in Mary Street, adjacent to Henry Street, for the sale by them in that store of fashion fabrics, and commenced trading there on 24 February 1972 and continued to trade there during the entire relevant period of this claim.
The period of 2 February 1972 to 17 June 1972 represents 136 days and the period from 24 February 1972 to 17 June 1972 constitutes a period of 114 days. The plaintiffs, claim, therefore, under this heading consisted of a calculation of the profits made by them taken on a yearly basis to 31 December 1971 whilst they were trading in the defendants premises, adjusted for inflation based upon the Consumer Price Index variation between 1971 and 1972, and then calculated on the basis of 136 days out of 365. Against that loss they conceded a set off calculated by arriving at the profit which they earned in Penneys from 24 February 1972 to 28 March 1973, a period of 371 days, divided proportionately on the basis of 114 over 371. This calculation was made by Mr Cornelius Smith, a consultant auditor, employed as an independent auditor for the presentation of the claim by the plaintiffs and was proved by him from the books and records submitted to him. Mr Declan O’Connor, consultant auditor, who was employed for the purpose of dealing with this claim on behalf of the defendants, did not approach the calculation of this loss of profits in the same way as did Mr Smith but, making no allowance for any inflationary increase in the profits which would have been earned in the period February 1972 to June 1972, had the plaintiffs remained on in the defendants’ premises, he arrived at a figure almost the same as that calculated by Mr Smith without the addition of the inflationary factor.
Whether or not this inflationary factor was, on the facts of the case, appropriate became in effect, therefore, the only issues between the parties on the calculation of the amounts under this claim. I was satisfied from the figures proved before me that there had been a definite increase in the sales and profits earned by the plaintiffs whilst they were engaged in the sale of fashion fabrics in the defendants’ premises from March 1969 until February 1972. I was further satisfied on the figures proved before me that this increase was at least equal to and in fact exceeded the inflationary increases during those years. It seems to me, therefore, a probable inference of fact that had the plaintiffs remained, as they *112 were entitled under their contract, trading in the defendants’ premises from February 1972 to June 1972 that they would have earned an increase on their previous years trading of at least the inflationary factor concerned. Furthermore, I was satisfied that it was inappropriate to set off 1972 earnings in Penneys against a calculation based on 1971 earnings alone in the defendants’ premises without making any allowance for the inflation which had occurred in the meantime. For these reasons I am satisfied that the plaintiffs calculation on Claim A is correct and accordingly I would assess the primary figure for damages under this heading at £9,967.00.
Claim B: Profits lost by the plaintiffs from 17 June 1972 to 16 June 1973 by reason of the continued trading in fashion fabrics by the defendants
It was not disputed before me that during this 12 month period the defendants had a total gross sales in their fashion fabrics department of £175,000. The plaintiffs claim was that the probability was that the entire of that trade would have been earned by them, the plaintiffs, in Penneys had the defendants, as they should have on the contract, abstained from trading. The plaintiffs calculate that their gross profit margin on that figure of sales would be at the rate of 38% thus yielding a gross profit lost of £66,500.
A considerable amount of evidence was then given on behalf of the plaintiffs that this was what was described as the top slice of the sales and that a much higher net profit figure could be realised on that than would be the overall or average net profit figure, and that the appropriate method of calculating what the net profit would have been on such additional sales was to deduct from the gross profit lost a figure constituting incremental cost saved only. The calculation again made by Mr Smith on behalf of the plaintiffs was that these costs, consisting only of administration costs, establishment costs, selling and distribution costs and financial costs, with a deduction from them for sundry income lost would have amounted to £21,800 only and that therefore the net loss of income was in the sum of £44,700.
The defendants firstly strenuously contested the calculation or estimate by the plaintiffs that they would have gained the entire of the trade carried on by them the defendants. They contented that at the very most 15% of those sales would have been enjoyed by the plaintiffs in their operation in Penneys. They further contended through Mr O’Connor that the method of approaching a calculation of the net profit loss by deducting incremental costs saved from the gross profit lost was unsatisfactory; depended upon the making of estimates without any proper accounting basis for them and was not as valid a method of calculating this particular type of loss as would be the calculation of a percentage net profit figure. In furtherance of that submission, Mr O’Connor calculated a net profit figure of 15% based on the overall net profit yielded by the audited accounts for the entire of the transactions carried on by the plaintiffs and the accounts in respect of the defendants trading in fashion fabrics, and also based upon other net profit *113 percentage figures known to him as a result of examining the files of other clients in his office engaged in similar trade. The amount calculated by the defendants on this basis for the loss under this heading was just under £4,000.
The issue with regard to the proportion of the sales enjoyed by the defendants in the year June 1972 to June 1973 which the plaintiffs would, in the absence of the defendants’ trade, have enjoyed depended upon estimates or opinions adduced by witnesses on both sides with regard to the overall proportion of the market enjoyed by persons trading in fashion fabrics within the general area of Henry Street. The evidence before me was that in O’Connell Street Clery’s Ltd and Cassidys traded extensively in fashion fabrics and there were a number of other traders trading in them in North Earl Street, the largest of which would have been Duffy’s. In Henry Street itself, apart from the two parties to this action, the plaintiffs maintained a separate specialist fashion fabric shop originally at the O’Connell Street end of Henry Street and later close to the defendants’ premises, and in addition Messrs. Arnotts, the well known department store, traded in fashion fabrics. It was contended on behalf of the plaintiffs that it is an error, having regard to their knowledge of the trade, to consider the whole area from O’Connell Street, North Earl Street and into Henry Street as constituting a single market area in this particular commodity of fashion fabrics, but that a more realistic and valid approach was to consider the Henry Street and Mary Street area as a separate market area only. The contrary was strongly submitted on behalf of the defendants. Apart from the sales figures for the plaintiffs trading in their separate shop and the plaintiffs trading in Penneys and the defendants trading in their own premises, no other sales figures were available and the evidence consisted of estimates by the persons in the two contending firms engaged in the sale of fashion fabrics.
I have carefully considered the evidence given on these issues and I have come to the following conclusions. I think the contention that, had the defendants not traded the major part of the sales so available to other retailers would have been enjoyed in the Henry Street area is more likely to be correct than the contention that it would have been scattered over the larger area consisting of O’Connell Street, North Earl Street and Henry Street.
Secondly, I conclude that the claim made on behalf of the plaintiffs that they would have enjoyed 100% of the sales which were in fact achieved by the defendants during this period is not supported by the evidence. I would reject also, however, an estimate as low as that contended for by the defendants at 15%.
I am satisfied that, having regard to the terms of the judgment which I gave in July 1976 and to the overall obligation properly and fully to compensate the plaintiffs for their loss, I must have regard not only to the extra trade which would undoubtedly have been enjoyed by the plaintiffs in their operation in Penneys had the defendants abstained from trading but also to any addition which they might have enjoyed in their specialist shop in Henry Street. Bearing these two outlets in mind, my conclusion is that between them the plaintiffs would, as a matter of probability, have enjoyed slightly more of the trade arising from the closure of the fashion fabric section in the defendants’ premises than would the other main competitor, Arnotts. I therefore conclude on the evidence before *114 me that the probability is that the plaintiffs would have enjoyed, as additional sales, 60% of the sales achieved by the defendants. This leads to the conclusion that the total of the sales lost by the plaintiffs during this period was in the sum of £105,000. There was no serious contention before me that the figure for gross profit claimed by the plaintiffs of 38%, and based upon their audited accounts over some periods, was incorrect and therefore I conclude that the gross profits lost by the plaintiffs during this period are 38% of £105,000, namely £39,900.
With regard to the dispute which arose as to the proper method of ascertaining from a gross profit the net profit lost to the plaintiffs during this period, I have come to the conclusion that, with qualifications and amendments, the incremental costs saved method of approach presented on behalf of the plaintiffs is more likely to yield a just result. I am not satisfied that the allowances made on behalf of the defendants for an increase in what might be the overall or average expected net profit percentage figure to make allowance, firstly, for the fact that these were the top of the sales and therefore clearly running at a higher net profit figure and, secondly, for the fact that the plaintiffs were not only retailers but wholesalers as well, is sufficient. Equally, I am not satisfied that there is any satisfactory method established before me of calculating or estimating any other percentage net profit figure with regard to these particular additional sales lost.
Assuming, however, that the method of calculation submitted by Mr Smith as auditor on behalf of the plaintiffs is the correct one, Mr O’Connor on behalf of the defendants made in respect of that, notwithstanding his view of its general unsatisfactory nature, what were in my opinion two valid criticisms. He doubted the assumption upon which Mr Smith’s figures were based that it would have been possible to absorb a substantially increased amount of turnover and sales in Penneys by the plaintiffs without increasing their staff. I am satisfied on the evidence that, in the particular circumstances in which the plaintiffs had their relationship with the defendants and their trading from their premised terminated, it was necessary for them to carry with them more staff than the anticipated or indeed the realised turnover in Penneys warranted. I am not, however, satisfied that it would be possible, as the plaintiffs contended before me, adequately to have dealt with such a large increase in turnover in their operation in Penneys as even my reduced sales figures of £105,000 represents, without some additional staff.
The second major criticism made by Mr O’Connor of the calculations of incremental costs put forward by Mr Smith was that they did not include any item under the heading of actual transport costs from the plaintiffs’ wholesale warehouse to the retail outlet in Penneys in respect of whatever aditional sales might be involved. Certain overhead and general costs are included in these incremental figures but, in my view, it seems reasonable that by reason of the failure, as it were, of Penneys to sell £105,000 worth more of fashion fabrics in the year 1972 to 1973, there would have been a saving to the plaintiff company of something in relation to actual transport costs of such fabrics. I have, therefore, concluded that there must be added unto the figure for incremental costs saved an item in respect of additional transport expenses and an item in respect of additional *115 sales increase.
Subject to these two additions, I am satisfied that the method of calculation put forward in the detailed claim on behalf of the plaintiffs of incremental costs saved is valid in both the amounts which are estimated or calculated in respect of the items included and in regard to the selection of items which should be included or excluded.
A number of the items in the incremental costs saved calculation, however, are of course directly proportionate to the amount of sales on which it is based and the calculations put forward by Mr Smith in the witness box were based on an assumption that the amount of sales lost was £175,000.
Some but not all of the items must, therefore, suffer a deduction there being in effect a total reduction of the incremental cost saved as the figure of additional sales decreases. The calculation made on behalf of the plaintiffs was based on sales of £175,000 and yielded a not total of incremental costs saved of £21,800. The sales figure which I am satisfied is the appropriate figure on which to base this portion of the plaintiffs assessment of damages is £105,000 and I have, therefore, made a reduction of 2/5ths in the items which I consider were related to the volume of sales.
The total of the deductions which I consider appropriate in this context are as follows:
£
Insurance
160
Depreciation
320
Sales Commission
880
Rent Surcharge
5,280
Bank Interest
800
Total
£7,440
In addition to the items which I have already indicated should, in my view, be added to the incremental costs saved calculation of Mr Smith a small item, consisting of discount receivable, was set off or deducted in his calculation of the incremental cost saved in the sum of £400. Since this was directly referable on allocation to turnover the figure must be reduced and in effect, therefore, a further addition made to the incremental costs saved figure. The total of those additions, therefore, I find to be as follows:
£
Add decrease in allowance for discount receivable
160
Add transport expenses
800
Add salary expenses
2,000
Total
£2,906
*116
Taking as a base the figure for incremental costs saved of £21,800 put forward on behalf of the plaintiffs there should, on my findings of fact and calculations, be added to it a sum of £2,960, and from the totals so arrived at there should be deducted a sum of £7,440 in order to make it referable to a sales lost figure of £105,000. I accordingly calculate that the appropriate incremental costs saved figure is £17,320. On this figure the net profit lost is £22,580.
Whilst I have arrived at a calculation of this figure in the manner which I have just outlined in this judgment, I have checked it as a net percentage profit figure of sales and it would appear to yield a result of approximately 21% net profit which, having regard to the evidence which I accept in this case, appears to be a confirmatory result.
Claim C: Profits lost after 16 June 1973 by reason of the continued competitive trading of the defendants without a year’s interruption.
The plaintiff’s have approached this claim in the following manner. Firstly, they submit that the loss resulting under this heading would have continued for a period of at least three years from June 1973. Upon that assumption they have calculated from the figures proved or agreed the comvined sales achieved during those three years by them, the plaintiffs, in Penneys and by the defendants in their own store. Thirdly, they have propounded in relation to the first two years of the three year period a percentage of these combined sales which they, the plaintiffs, would have enjoyed had the defendants’ business in fashion fabrics been interrupted for one year. They have further calculated the proportion which they, the plaintiffs, in each of these two years did actually enjoy of the combined sales and, upon the reluctant difference expressed in terms of percentage and applied to the combined sales figure for each of the two years concerned, they have created a figure for sales lost. On that figure they have operated as a calculation of net profit lost an incremental cost saved figure calculated from the percentage proportion of $21,800, the figure calculated for the year 1972–1973 upon the gros sales lost figure claimed for that period of $175,000 namely a 12.5% incremental costs figure savings. This calculation produces a figure which is almost exactly 25% expressed in terms of net profit on sales lost.
With regard to the third year of the period claimed by the plaintiffs their approach to the calculation of damages is based on a simple assumption that their loss of sales would have represented 50% of the sales lost in the previous year and upon that figure the same calculations for net loss are made.
The defendants’ contention with regard to the amount of the loss incurred by the plaintiffs under this heading and indeed the method of calculating it is almost entirely different. Firstly, the defendants contend that any loss resulting under this heading to the plaintiffs would have certainly concluded in the third year and, although they have made calculations to allow for a small loss during that year, in effect through their evidence doubted that it would have continued beyond two years. Secondly, the defendants content that the assumptions made by the plaintiffs as to the proportion of combined sales which they would have enjoyed *117 had the defendants resumed trading in June 1973 is grossly overstated, making an insufficient allowance for the capacity of the defendants, having regard to the general popularity of their department store and the attraction of a fashion fabrics section in a department store, to capture a significant proprotion of the overall local market for fashion fabrics even from the commencement of a new trading period. The defendants on this aspect of the case relied in particular upon the achievement of the plaintiffs themselves in the period 1969 to 1972 in starting from what they, the defendants, asserted in evidence was practically a new position, the fashion fabrics section of the defendants’ premises in 1969, previous to the entry of the plaintiffs under agreement into the premises, having substantially run down. The defendants also, of course, contested before me the net profit figure coming out at 25% approximately, upon which the plaintiffs’ claim for damages under this heading was assessed. The defendants in reply put their theory as to the appropriate basis of the loss as being that the plaintiffs would have lost approximately one half in the year ending June 1974 of what they, the defendants, believed they had lost in the year ending June 1973, and that provided you increased that by the inflation figure derived from the Consumer Price Index, you adequately compensated them for their loss. Similar reduction of one half in the year 1975 to that suffered in 1974 and the consequential and further loss of one half in 1976 of that suffered in 1975 yielded what the defendants said was the upper limit of the plaintiffs’ loss under this heading.
In terms of figures the plaintiffs in their calculation of their total loss for the three years after June 1973 arrived at a figure of £36,720 and the defendants, who had contended for a net loss in the year 1972 to 1973 of just £4,000, calculated the loss for the further three years at £4,337. The plaintiffs arrived at their claim for loss with regard to the year ending 17 June 1974 upon an assertion that, of a combined sales of £340,000 approximately, they should have obtained 75% and only obtained 51%. 75% of £340,000 is £255,000.
I have already decided that the probable figure of additional sales lost to the plaintiffs in the year ended June 1973 by reason of the continued trading of the defendants was £105,000, and on the figures proved before me this decision involves an assumption that had the plaintiffs been trading in the year ended June 1973 without competition from the defendants they would have had total sales in the region of £265,000.
I am not satisfied on the evidence which I have heard, bearing this assumption in mind, that if the defendants had resumed trading in fashion fabrics in June of 1973, as they would have been entitled to do under the contract, and started afresh after a year’s interruption of their trading they would have recovered from the plaintiffs as little as approximately £10,000 of sales. In reaching this decision, I have made allowance for an expected increase in sales in the plaintiffs business in the year 1973–1974 from inflation, apart from any increase in their sales capacity. I must reject, therefore, the proposition that the plaintiffs would have achieved as much as 75% of the combined sales in 1973–1974 had the defendants not been trading in 1972–1973. I therefore, of course, reject the lost sales figures on which the plaintiffs claim is based in this context of £81,000. I am satisfied, however, that there was a substantial loss due to this factor and bearing *118 in mind all the evidence I have heard I assess that loss at £50,000. I see no reason to depart from the 21% net profit figure which my calculation of the incremental costs in the period June 1972 to June 1973 yields and, therefore, I calculate the loss of the plaintiffs during the period June 1973 to June 1974 at £10,500.
With regard to the succeeding years, though the method of approach of the plaintiffs and defendants has been different and though the figures upon which their calculations were made are widely different, there is a substantial unanimity of view that it was probable that the plaintiffs, by reason of the defendants’ breach under this heading, would have lost sales in the year June 1974 to June 1975 of approximately half what they lost in the previous 12 months, and that in the third period from June 1975 to June 1976 they would have lost approximately half of what they lost in the previous 12 months. This appears to me, therefore, to be an acceptable and valid formula for ascertaining the net loss of profit during the two succeeding 12 month periods and I therefore assess the loss for those two periods at £5,250 and £2,625 respectively. I therefore assess, expressed in the currency of the time, the loss sustained by the plaintiffs due to the failure of the defendants to interrupt their trading in the year June 1972 to June 1973 as a continuing loss after the conclusion of that period in the sum of £18,375.
Claim of plaintiffs for increase to loss assessed to compensate for inflationery decrease in the purchasing power of money
Mr Liston SC, on behalf of the plaintiffs, stated this portion of the claim upon the simple proposition that the loss suffered by the plaintiffs, having been incurred by them in the years 1972 to 1976 and having been calculated in accordance with the figures actually lost during those three years, bearing in mind the very significant decrease in the purchasing power of money since that period, if they are now paid by the defendants those figures only they are not fully and adequately compensated and in particular cannot be said to have been put in the same position as if the breach of contract had not occurred.
He relied in the first instance on the well known decision of the House of Lords in Livingstone v Rawyards Coal Co. (1880) 5 App. Cas. 25 and in particular upon that portion of the opinion of Lord Blackburn in which he stated, at p. 39:
The point may be reduced to a small compass when you come to look at it. I do not think there is any difference of opinion as to its being a general rule that, where any injury is to be compensated by damages, in settling the sum of money to be given for reparation of damages you should as nearly as possible get at that sum of money which will put the party who has been injured, or who has suffered, in the same position as he would have been in if he had not sustained the wrong for which he is now getting his compensation or reparation.
He relied in addition upon my own decision in Quinn v Quality Homes Ltd High Court 1975 No. 2242 P, 21 November 1977, in which, in a case concerning a warranty with regard to the structural condition of a house, I assessed damages on the basis of the cost of obtaining alternative accommodation at the time of *119 trial rather than at the time when the faults were first discovered. He also submitted that the same principle appeared to have been accepted, if not expressly, impliedly, by the Supreme Court in Munnelly v Calcon Ltd [1978] IR 387 and pointed also to the decision of the Supreme Court under the Landlord and Tenant Act with regard to the calculation of rent upon renewal of leases in Byrne v Loftus [1978] IR 326 which clearly involves an acceptance or an appreciation by the court of the consequences of inflation. Mr Salafia, who on behalf of the defendant dealt with this portion of the argument, contended, firstly, that damages for breach of contract in a case such as the present are clearly confined on principle to damages within the contemplation of the parties and reasonably foreseeable by them having regard to their knowledge, and that the effects and extent of inflation could not come within that category. He further submitted, in the alternative, that the claim to apply an inflationary factor on the losses assessed was nothing more than a substituted form of claim for interest and that the decisions and principles applicable clearly inhibited the court from granting interest in a case of this description. Neither counsel could refer me to any decision, nor am I aware of any, dealing directly with a claim for an increase in losses assessed consisting of a factor based on a decrease in the purchasing power of money between the date when the losses were incurred and the date when judgment came to be given.
I have considered the submissions made to me on this issue and the cases to which I have been referred and I have come to the following conclusions. I am not satisfied that either the decision in Munnelly v Calcon Ltd or the decision in Quinn v Quality Homes Ltd is of any direct or real assistance to the resolution of this issue. Both of those cases appear to me to have proceeded directly upon the question as to the steps which the injured party might have taken to mitigate his loss rather than on any question of a simple or direct increase of the loss suffered as ascertained by an inflationary factor.
For the resolution of this issue, therefore, it is in my view necessary to return to the fundamental principles upon which damages in cases of breach of contract should be assessed. For the purpose of this case I would accept those principles as stated in Hadley v Baxendale (1854) 9 Exch 31 and re-stated in the judgment of Asquith LJ in Victoria Laundry (Windsor) Ltd v Newman Industries Ltd [1949] 2 KB 528, subject to the comments made on that decision by the House of Lords in C. Czarnikow Ltd v Koufos; The Heron II [1969] 1 AC 350.
In particular, as relevant to the issue now being considered, I would adopt the propositions set out at p. 539 of the judgment of Asquith LJ in the Victoria Laundry case namely:
(1). It is well settled that the governing purpose of damages is to put the party whose rights have been violated in the same position, so far as money can do so, as if his rights had been observed …
(2). In cases of breach of contract the aggrieved party is only entitled to recover such part of the loss actually resulting as was at the time of the contract reasonably foreseeable as liable to result from the breach.
(3). What was at that time reasonably so foreseeable depends on the knowledge then possessed by the parties or, at all events, by the party who later commits the breach.
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The comments of these statements of principle arising from the decision of the House of Lords in C. Czarnikow Ltd v Koufos: The Heron II may be summarised as being restricted to the question as to what is reasonably foreseeable and as indicating that there should be considered as being reasonably foreseeable only such matters as were not unlikely to occur, excluding matters likely to occur only in a small minority of cases or being very unusual.
Adopting these principles, it is first necessary it seems to me for the resolution of this issue to consider whether the application to the figures assessed as loss incurred in years 1972 to 1976 of an inflationary factor is something which is necessary to put the plaintiffs in the same position so far as money can do as if their rights under the contract had been observed
On the facts of this case I am not satisfied that the plaintiffs have established that this is so. What the plaintiffs lost in the periods concerned were ordinary trading profits. Had they been earned as the contract provided, they would have become part of the general income of the plaintiff company and would presumably have either been applied in part or in whole as dividends to individual shareholders, towards defraying the company’s debts, liabilities and running costs or towards the creation of some form of reserve. In the absence of proof, which did not occur in this case, of the manner in which the company’s income was applied in the intervening period it would appear to me to be an unwarrantable assumption that such trading profits would now be held by this company in full, exempt from any intervening loss or depreciation, and so increased that their present value expressed in currency had the same purchasing power as would the profits have had when originally earned.
The second issue which arises, namely as to whether the defendants at least having regard to their knowledge at the time of the formation of this contract could reasonably have foreseen in the manner which I have outlined this particular consequence of its breach, depends upon the consideration of a number of different factors. The breach of this contract occurred in part at least upon the service of what was held to be the improper notice of termination in December 1971 and was concluded by the continued trading by the defendants in fashion fabrics after 2 February 1972. The plaintiffs cause of action for damages for breach of contract then clearly arose, and whilst it could only then be formulated upon the basis of estimates with regard to the amount of the loss as distinct from the way in which it has been formulated largely dependent upon actual experience, it was a cause of action which could immediately have been pursued. Under the terms of the agreement the first step in pursuance of the plaintiffs’ claim was to submit the question as to whether the defendants had been justified in their method and timing of termination to arbitration and the award of the arbitrator was not delivered until 12 July 1973. These proceedings were instituted in March 1975 by plenary summons and, an issue having been directed by the court in march 1976 by way of preliminary issue on the principles applicable to the assessment of damages, judgment was delivered in that in July 1976. From July 1976 to July 1979 a delay in bringing forward the further assessment of the damages in pursuance of the principles decided in that judgment originated from the very practical and commonsense attempt of the parties by the exchange of figures and *121 information to reach agreement on all or part of the damages. From August 1979 until the present the delay in determining this issue was due to an application in July 1979 by the defendants for an adjournment, which was granted by me only on terms that they pay interest on the amount eventually recovered by the plaintiffs from that date until the final determination in the High Court, and therefore that period is not part of the claim in relation to inflation and the decrease in the purchasing power of money.
On this short recital of the facts, in which I do not suggest that there has been established to me culpable on the part of either the plaintiffs or the defendants, the question which seems to me to arise is as to whether not only what might be described as the ravages of inflation but also what is in fact claimed namely the effect of inflation over such a lengthy period could have been a heading of loss, within the principles which I have set out in this judgment, reasonably within the contemplation of the defendants. I have come to the decision that it could not. I think it reasonable to infer that any person engaged in trade as the defendants had been in the decade or so before 1969 would have been able to foresee as a not unlikely event that inflation and a consequential decrease in the purchasing power of money would probably continue. It is not, however, in my view on the evidence before me a reasonable inference to draw in this case that the defendants in 1969, at the time of the formation of this contract, could have reasonably foreseen even if they had directed their mind towards it that, in the event of a breach by them of the contract in 1971, the assessment of the damages recoverable by the plaintiffs as a consequence of that breach would not be determined until 1980. On this basis I conclude that an increase on the loss assessed by me to compensate for the inflationary decrease in the purchasing power of money is not an allowable heading of loss in this case.
Defendants claim that damages should be reduced in respect of what would have been the plaintiffs’ liability to corporations profit tax and income tax
The defendants in making this submission relied in the main upon the decision of Kenny J in Glover v BLN Ltd (No. 2) [1973] IR 432. Kenny J there held that, in assessing damages for wrongful dismissal consisting of loss of salary, commission and fees, so much of the sum being awarded as did not exceed £3,000 and was therefore not chargeable to income tax pursuant to the provisions of ss. 8 and 9 of the Finance Act, 1964 (now replaced by ss. 114 and 115 of the Income Tax Act, 1967) should be reduced by an appropriate amount for the income tax and surtax which the plaintiff would have paid upon such salary, commission or fees had he earned them in his employment. In reaching that decision the learned judge followed and applied the decision of the House of Lords in British Transport Commission v Gourley [1956] AC 185, and since in that case it had been conceded that the damages recoverable were not chargeable to tax he independently examined the question as to whether, in an action for wrongful dismissal, damages for loss of earnings, fees or commission are, apart from ss. *122 8 and 9 of the Act of 1964, chargeable to tax. His decision was that they are not, and in reaching that decision he considered and relied, inter alia, upon the following cases: Chibbett v J. Robinson & Sons Ltd (1924) 9 TC 48, DuCros v Ryall (1935) 19 TC 444, Carter v Wadman (1946) 28 TC 41 and Henley v Murray [1950] 1 All ER 908.
The defendants’ submission in short is that, whereas the decision of Kenny J in Glover v BLN Ltd (No. 2) and the cases therein referred to all refer expressly and exclusively to a breach of a contract for services and to a claim for damages for wrongful dismissal, the principles contained in them can and must be equally applied to a claim for damages consisting of loss of trading profits.
I accept and follow the decision of Kenny J in Glover v BLN Ltd (No. 2) and therefore proceed upon the basis that, if the damages recoverable by the plaintiffs in this case are not chargeagle to tax when recovered and coming to their hands, it is appropriate that a deduction from the gross amount of the loss suffered by them should be made and calculated in respect of corporation profit tax and income tax which they would have paid had the profits in respect of which the damages are assessed been earned by them.
The only issue remaining, therefore, with regard to this submission, is the issue as to whether damages assessed as I have already assessed them in this judgment as loss of net trading profits by the plaintiffs due to a breach of the trading agreement contract by the defendants are or are not chargeable to tax. Having carefully considered the submissions made to me and the cases referred to I have come to the conclusion that such damages are chargeable to tax and that, therefore, it is not appropriate as the defendants claim to make any deduction from the gross amount of them when assessed in respect of liability for corporation profit tax or income tax.
It would not appear that the question of the loss of trading profits arising by breach of a trading agreement has been considered in relation to their chargeability to tax in this country but there are a number of cases dealing with it which appear to be of assistance.
Firstly, it was considered, though undoubtedly in an interlocutory application, by Curran LJ in the Northern Ireland Queen’s Bench Division in Morahan v Archer and Belfast Corporation [1957] NI 61. The issue there arose in a motion brought by the defendants in a negligence action for leave to deliver interrogatories to the plaintiff, who was a taxi driver, who had claimed against them damages in respect of his taxi-cab which had been in collision with an omnibus. The claim included by way of special damages a claim for loss of profits and the defendant sought leave to deliver interrogatories with regard to matters concerning the liability to tax of the plaintiff and the tax previously paid by him upon the basis that any damages in respect of loss of profit would be subject to deduction of income tax liability when being assessed by the court. Curran LJ in refusing to leave to serve the interrogatories proposed, held that prima facie it would seem that when tax is payable on profit it should also be payable on any sum obtained as compensation for the loss of that profit and expressly followed the decision in the Burma Steamship Co Ltd v Commissioners of Inland Revenue 1931 SC 156. In that case the owners of a ship claimed damages for delay by ship repairers *123 in the carrying out of a contract to repair which included a claim for loss of profits during the period when the ship, in accordance with the contract, should have been repaired and when the delay had occurred. Having compromised that action and received a sum in compensation inter alia for this loss of profit, the ship owners were then assessed for tax upon the basis that the compensation so recovered constituted earnings. Against that assessment they appealed to the Commissioners for the Special Purposes of the Income Tax Acts who confirmed the assessment but, at the request of the company, stated a case on appeal to the Court of Session. The Court of Session decided that the compensation for loss of profits so recovered was chargeable to tax and in effect confirmed the assessment made. Consideration of the judgments in that case would indicate that the main issue presented to the court in the arguments was as to whether the sum recovered was a profit or gain arising from the appellants’ trade as a shipowner, or whether as they contended the ship having been recently purchased and the re-fitting and repair being in a sense part of the entire transaction of acquiring a new ship, it was a compensation in relation to the acquisition of a capital instrument of trade. Notwithstanding this fact, having considered the judgments of the Court I am satisfied that this case is a clear decision supporting the general contention that where compensation is paid for loss of profit or gain arising from a person or corporations trade that it is prima facie chargeable to tax.
This issue came before the Chancery Division in England in Wiseburgh v Domville (Inspector of Taxes) [1955] 1 WLR 1287. In that case a manufacturer’s agent who had two main agency agreements suffered loss by reason, as he alleged, of the unlawful termination of those agreements by his principal without the appropriate notice provided for. He brought an action for damages for breach of contract and also for commission due up to the date of the breach. The matter was eventually compromised in that the plaintiff abandoned his claim for commission due up to the date of the breach and accepted a compromise sum of £4,000 as damages for breach of the agreement. Harman J held that the damages so recovered were taxable as a trading profit. Whilst it is clear from the judgment that the main argument in the case turned on a submission made on behalf of the taxpayer that these two agreements formed such a large part of his general trade that their termination constituted the loss of a capital asset, it seems to me that the case is relevant in that it is if anything closer than the instant case before me to the cases where damages were advanced for wrongful dismissal and a breach of a contract of service and yet there is no suggestion that the damages awarded on that basis could be exempt from taxation. At p. 1291 of the judgment Harman J stated as follows:
If this was merely a compensation for the loss of trading profit by an agent, and if the contract would have resulted in a taxable profit to the taxpayer, if it had been allowed to run its proper course, what he has got is merely a quid pro quo for that. I do not see why he should not pay tax just as much on the compensation he got as he would have done on a profit had he earned it. It seems to me, therefore, that what he has got is income, just as much as what he would have got had the agreement been allowed to run. Consequently, it seems to me that the commissioners came to right conclusion.
I can seen no distinction in the compensation received by the plaintiff in Wiseburgh *124 v Domville by reason of the unlawful and premature termination of his agency agreements and the damages which I have assessed in this case as loss of trading profits by the plaintiffs by reason of the unlawful and premature termination of their trading agreement with the defendants. I would be prepared to follow the reasoning of Harman J and, in the absence of any Irish decision binding upon me or a persuasive precedent which I should follow, I am satisfied that the legal position is that the rule or principle followed by Kenny J in Glover v BLN Ltd (No. 2) applies only to damages for wrongful dismissal and breach of a contract of service and is so expressly to be confined, and that damages as occur in this case for loss of profits are prima facie chargeable to tax. Having regard to the principle which I have already accepted that a question of deduction in respect of tax only arises if the damages when recovered are not chargeable to tax, I therefore reject the defendants’ submission on this aspect of the case.
I accordingly assess damages in the total sum of £50,922.00. By virtue of the order made on the application for adjournment in July 1979, interest is payable on that sum at 15% per annum between 15 July 1979 and today. I calculate that period to be approximately 42 weeks and that accordingly the approximate rate of interest is 12.1%. This in round figures makes a sum of £6,161 which, added to the damages assessed, means that judgment will be for a total sum of £57,083.
Carey v. Independent Newspapers (Ireland) Ltd.
[2003] IEHC 67 (7 August 2003)
JUDGMENT of Mr. Justice Gilligan delivered on the 7th day of August 2003.
The plaintiff in these proceedings is a journalist by occupation and a married lady. She appears to have been a very distinguished journalist joining Ireland on Sunday in September, 1997 and rising to be the political editor correspondent earning approximately £35,000 (€44,440.00) per annum on a contractual basis in February, 1999. While with Ireland on Sunday she worked Tuesday through Saturday, commencing at 10 a.m. in the morning and concluding on Saturday with the 4 p.m. deadline for the following day’s edition and this arrangement dovetailed perfectly with the plaintiff’s domestic responsibilities in respect of her son, Eamon, who was born on the 20th November, 1998.
The Facts
The plaintiff was contacted by Paul Drury who was then the editor of the Evening Herald newspaper at some time in late September, 1999, with a view to ascertaining if she would be interested in taking up a position as political correspondent with the Evening Herald. A meeting was arranged at the Palace Bar. The plaintiff says she made it clear to Mr. Drury that it would be impossible for her to
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work in the early mornings at the offices of the Evening Herald by reason of the fact that she could not get a child minder and that she would have to work from home for the first edition. The proposed salary was also discussed. Mr. Drury indicated to her that he would have to go back to discuss the matter with Mr. Carlisle, Mr. Dunne and Mr. Roche.
From his perspective, Paul Drury gave evidence that the previous political correspondent with the Evening Herald had resigned and the paper was being relaunched and in his professional opinion it was essential to get a senior responsible journalist to fill the vacancy as political correspondent as quickly as possible. He had known the plaintiff who had worked on occasion for him on a free-lance basis and knew that she was a self-starter. He referred to the fact that she had been responsible for the breaking of some major stories such as the child organ retention scandal and he saw her as particularly suitable for the proposed new agenda for the Evening Herald. When he went to the first meeting with the plaintiff at the Palace Bar he was of the mind that the paper had a serious weakness without a political correspondent and he wanted to know if Mairead Carey, the plaintiff, was interested in the proposed position. At first she appeared to him to be a little hesitant and she referred to the fact that her job was going well with Ireland on Sunday. This appears to be an important factor because there is no suggestion whatsoever that prior to this meeting, the plaintiff had any plans to leave her existing well paid position. Mr. Drury says that he outlined the plan for the Evening Herald to the plaintiff and that they were going to aim at the mid-market as he wanted a heavyweight political correspondent with a Dublin focus. He accepts that she raised the issue of not being able to work in the early hours in the office as it was not practical for her and she would have to cover the morning session from her home.
He accepts that there was a discussion as regards salary and that it was the plaintiff who suggested a figure and when this initial meeting concluded there were two issues to be clarified, one being salary and the other being the plaintiff working from home in the early hours. He accepts that he indicated that he would have to talk to his colleagues, Mr. Dunne, Mr. Roche and possibly Mr. Carlisle but he is not sure if he ever actually discussed the situation with the latter. His concern was that he wanted a candidate found as quickly as possible and if necessary he was going to recommend that the additional money as required be forthcoming. He also wanted
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approval for the slightly unusual arrangement of the plaintiff working from home for the first edition shift.
The subsequent events appear to me to be of significant importance. Mr. Drury did go back and he discussed the matter with Mr. Michael Roche who was the Group Managing Editor of the Independent Group Newspapers. It is of particular significance that when Mr. Drury discussed the matter with Mr. Roche he had serious reservations as regards the plaintiff working from home. He was aware that the plaintiff had some difficulty but he took the view that if it suited Mr. Drury and his team and if he believed it workable, he was happy to go along with it.
However, Mr. Roche was reluctant to confirm the issue of working from home in writing as he indicated to Mr. Drury that the group may want to review this issue in the future and I am left with the distinct impression that Mr. Roche was not at all happy about the arrangement and in this regard I am satisfied that Mr. Drury never advised Ms. Carey that Mr. Roche had a serious concern about the proposed working arrangements.
Mr. Drury also had a previous conversation with Mr. Dunne in his capacity as Group News Editor for the Evening Herald and the Irish Independent and Mr. Dunne did not have any reservations about the agreed working arrangements, provided they worked out. He did become aware of Mr. Roche’s reservations and he took the view that if the system as arranged worked, it would be okay but that it was a matter for the editor and it was his responsibility to make it work.
There were apparently a number of other candidates but the plaintiff was the desired corn candidate and Mr. Drury discussed the matter with Mr. Paul Dunne and got good reports in relation to the plaintiff.
Mr. Drury also obtained approval for the plaintiff’s salary arrangements in the sum of IR£45,000 (€57,138.21) and there were then a number of telephone calls between the plaintiff and Mr. Drury in which the two central matters pertaining to the plaintiff’s salary and working from home for the first edition were agreed and, insofar as the plaintiff could not obtain confirmation in writing as regards the working arrangements, she took Mr. Drury’s word for it against the background where she was aware that he had discussed the matter with senior management.
At the second meeting between Mr. Drury, Mr. Dunne and the plaintiff, other than there having previously been a mention that Mr. Brennan, the
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News Desk Editor, may not have been that happy with the arrangement proposed, neither Mr. Drury nor Mr. Dunne put the plaintiff on notice that in the background serious reservations had been expressed by Mr. Roche group editor about the proposed working arrangements.
In my view, this amounted to a significant breakdown in communication, principally between Mr. Drury and the plaintiff. He had the unique knowledge and insight into the plaintiff’s position that she could not work for the Evening Herald if she was required to attend at their offices for the first edition. She was not interested in any private arrangements, or ad hoc agreements. From her point of view, she made it plain that she could not take the job if she had to go into work in the early mornings and Mr. Drury was fully aware of this fact. I am satisfied on the evidence that Mr. Drury never advised Mr. Roche and Mr. Dunne that the plaintiff could only take up the position she was being offered provided she did not have to work from the office in the early mornings.
Accordingly, insofar as an agreement was reached between the plaintiff and Mr. Drury, there was no room for the situation being left to see how it worked out or, impliedly, that if it did not work out, the plaintiff would then have to come into work in the early mornings to the office of the Evening Herald which, quite simply, she could not do.
In my view, on the evidence, Mr. Drury had full authority to negotiate the agreement with the plaintiff on the defendant’s behalf and by representing to the plaintiff that her requirement that she would work from home for the first edition in the mornings would be acceded to in the light of the knowledge that he possessed, this was in my view an inducement to the plaintiff to give up her contractual relationship with Ireland on Sunday so as to take up employment as Political Correspondent with the Evening Herald.
I accept Mr. Drury’s evidence that following the second meeting, the plaintiff was told she had the job and that the matters subsequent to that arrangement were formalities, namely the medical which the plaintiff passed, the application for the job and the subsequent interview. I am fortified in the view which I have arrived at in relation to the agreement having been reached at the second meeting by the evidence of Mr. Carlisle where he says that by the time of the interview which took place on the 9th November 1999, it was very clear to him that the deal was done.
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Mr. Drury entered the arrangement on behalf of the company and offered the plaintiff employment in good faith and he could not envisage the employee being told of major changes in employment and any changes during his period of control would be by agreement.
As I have previously indicated I do not believe that events which took place subsequent to the plaintiff being told she had the job are of any great relevance to the legal issue that arises in this case. Clearly with Mr. Drury’s departure from the position of editor, a number of people were concerned that the arrangement as agreed with the plaintiff would not work out. I accept Mr. Roche’s evidence that he was not aware of the fact that Mr. Drury’s position was in jeopardy until at best a few days before his employment ended. I accept the submission of counsel for the defendant that it would be unrealistic to penalise the defendant company in some way because of the fact that Senior Management may have been discussing the termination of Mr. Drury’s employment and management at a lower level were not made aware of this fact.
I fully accept that Independent Newspaper Group were well intentioned to Ms. Carey and that in a different set of circumstances, the arrangement would probably have worked very well. Because of Ms. Carey’s experience, Independent Newspapers were clearly keen to take her on as Political Correspondent and she was equally keen to take up the position and advance herself within the Group but unfortunately events conspired to overtake both the plaintiff and Mr. Drury with the inevitable conclusion that because the plaintiff could not work the 7 a.m. – 9.30 a.m. shift at the offices of the Evening Herald, her employment came to an end in April 2000.
I accept Mr. O’Regan’s evidence that if it had been his decision, he would never had taken on the plaintiff as Political Correspondent on the basis that she was not going to be able to attend in the offices for the first edition shift. He said the arrangements for the plaintiff were unworkable and the plaintiff could see no difficulties why she could not have been allowed work from home.
In this regard I am satisfied that Mr. O’Regan was bona fide in the views that he holds and he is entitled to have his professional opinion respected. In the particular circumstances, the difficulty that arises is that Mr. Drury had already put the arrangement in place against the background which I have previously outlined and the reality of the situation was that the plaintiff could not adhere to Mr. O’Regan’s
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proposed regime so that in effect, on a bona fide basis, the new editor required the plaintiff to be in attendance from 7 a.m. onwards and equally on a bona fide basis the plaintiff could not comply with this request and indeed never could have because of her domestic circumstances.
It is quite clear from the manner in which this case is presented to the Court by the Independent Newspaper Group that no aspersion is cast on the plaintiff’s capacity and integrity as a journalist and in particular as to her role as Political Correspondent.
Post Termination.
Following the termination of her employment, the plaintiff attempted to obtain alternative work of a similar nature. In this regard, I accept her evidence that jobs in the nature of a political correspondent do not come up very often and she had no alternative but to return to freelancing, working for alternative media sources and she also worked for a text messaging agency. Her accountant has given evidence as regards her actual financial loss. The plaintiff has studied for the degree of Barrister-at-Law at the King’s Inns and has recently qualified and is hoping to commence practice. Counsel for the plaintiff in opening the case submits that one year’s notice would have been reasonable in the circumstances of this case. The evidence given on behalf of the plaintiff by Seamus Dooley, the Irish Organiser of the N.U.J. was to the effect that the current N.U.J. has agreement with the Defendant provides for a one month notice period for an employee such as the plaintiff and this agreement came into place in or about May, 2001, the plaintiff’s employment having been terminated in April, 2000. He accepted that there was no particular custom or practice in place at the time of the termination of the plaintiff’s employment and he considered that the one month notice period provided for in the current N.U.J. agreement was reasonable.
Ryan Dowling, a Senior Political Correspondent, gave evidence that the current notice period applicable to his employment with the Defendant, was one month and that when he moved from the Defendant Group to the Sunday Times Newspaper he entered into a contract which provided expressly for a three months notice period in 2001. Mr. Dowling indicated that when he left The Independent Newspaper Group to take up employment with the Sunday Times, he gave them one month’s notice of termination of his employment.
Submissions of the plaintiff
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The plaintiff’s first claim is for damages for breach of contract and/ or for wrongful dismissal (paragraph 5, Statement of Claim), and her second claim is for general damages for negligent misstatement/ misrepresentation (paragraph 6, Statement of Claim). The central allegation of the plaintiff in these respects is that the defendant represented to her during the negotiations leading up to her contract of employment that she would be employed under the conditions pleaded in paragraph 4 of the Statement of Claim, the most important of which in the context of this claim is the matter set out at paragraph 4(b) in the Statement of Claim, i.e. “That the plaintiff would work from home from 7.00am until the first edition deadline and from thereafter would work from the Dail for the remainder of the working day.” The plaintiff further alleges that the defendants knew or ought to have known that this was not true. The plaintiff claims that she relied on the representations and was induced by them to enter into the contract of employment with the defendant and suffered loss as a result.
The plaintiff submits that the summary termination of her contract by the defendant on 17th April 2000 without cause was in breach of the terms and conditions of her contract with the defendant, in particular the agreed working arrangement whereby she would work from home from 7am until the first edition deadline which, it is submitted, is a fundamental term of the plaintiff’s contract and accordingly cannot be varied except by consent.
The plaintiff contends that the defendant represented to the plaintiff during the negotiations for her contract of employment that if she were to be employed by the defendant as the political correspondent of the Evening Herald that she could work from home from 7am until the first edition deadline and as such was a statement of fact. The plaintiff submits that the parties intended that the statement would constitute a binding promise on the defendant and as such was a binding collateral warranty which the defendant breached.
With regard to the question of whether the plaintiff is entitled to additional damages where the dismissal caused injury to her reputation (as is contended by the plaintiff), the plaintiff submits that the position in the United Kingdom that such an entitlement does not exist has not yet been accepted in Ireland and has been rejected by the rest of the common law world and in any event that additional damages have always been recoverable under the remoteness test laid down in Hadley v. Baxendale.
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Submissions of the defendant
The defendant contends that if the court finds that the plaintiff did have a contract of employment with the defendant in accordance with the alleged representations, then by definition there was no misrepresentation and the plaintiff can only succeed in her claim for breach of contract/ wrongful dismissal.
In the alternative, the defendant submits that if the court finds that representations were made about the nature of the contract of employment that would be entered into and that these representations did not accord with the actual contract of employment, the court will have to determine the issue of whether such representations were made negligently and what loss arose. It is submitted that the loss complained of was that the plaintiff changed job and that she would not have done this had the representation not been made.
The defendant contends that the plaintiff’s contract did not contain a term to the effect that she was entitled to work from home from 7am until the first edition deadline and thereafter to work from the Dail for the remainder of the working day. The defendant contends it was a work practice and not a term of the contract of employment and therefore subject to change by the defendant when done bona fide in pursuit of the business interests of the defendant newspaper group. Further, it is submitted that the work practice was contingent on Mr. Drury and/ or the arrangement working to the satisfaction of both parties.
Making the assumption that the contract of employment does not contain the term to the effect that the plaintiff was entitled to work from home from 7am until the first edition deadline and thereafter to work from the Dail for the remainder of the working day, the defendant concedes that if the court finds that a representation was made to the plaintiff that she would be employed on the basis of this term, the plaintiff’s contract of employment did contain such a term.
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The defendant contends that the plaintiff is not entitled to make separate claims for breach of contract/ wrongful dismissal on the one hand and misrepresentation on the other hand, given the differing purposes of damages for these differing claims. The defendant contends that the purpose of damages for breach of contract/ wrongful dismissal is to place a plaintiff in the same position as if the contract had been properly performed. In light of this, the defendant contends that in the circumstances of this case the application of this principle means that damages must be awarded on the basis that the plaintiff had been given reasonable notice that the contract would be terminated- in other words, damages for breach of contract/ wrongful dismissal should be confined to the notice period.
With regard to the claim for negligent misrepresentation/misstatement, the defendant submits that the basis for assessing damages for alleged negligent misrepresentation is placing the plaintiff back in the position he/she would have been had the alleged misrepresentation not occurred. The defendant contends that in the circumstances of this case, this would mean awarding damages to the plaintiff on the basis that had the alleged negligent misrepresentations not been made, she would have remained in her post as political correspondent with Ireland on Sunday. Accordingly, the defendant contends that the court cannot award damages both on the basis that the plaintiff should have had her contract terminated in accordance with a period of reasonable notice and on the basis that the plaintiff would have remained with Ireland on Sunday had the representations not been made
A claim for damages for injury to the plaintiff’s reputation as a journalist was made in paragraph 6 of the Statement of Claim. The defendant contends that damages for this part of the plaintiff’s claim are not recoverable given the general rule at common law that in an action for wrongful dismissal, a plaintiff is not entitled to claim damages for the injury to reputation flowing from the dismissal.
With regard to the question of reasonable notice, the defendant concedes that there was an implied term in the plaintiff’s contract that reasonable notice had to be given as there was no express agreement regarding notice periods between the parties.
Referring to the evidence of Seamus Dooley, the Irish Organiser of the NUJ, Brian Dowling and the evidence of the plaintiff (the defendant contends that the effect
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of the plaintiff’s evidence is that there is no custom or practice with regard to notice and that this contention is supported by the evidence of Mr. Dowling), the defendant submits that the evidence before the court clearly establishes that a one-month notice period is reasonable and that there is absolutely no evidential basis for the plaintiff’s contention that a reasonable notice period in the circumstances would be not less than one year.
The law of warranty
Not every statement or representation of fact made by parties in pre-contractual negotiations will form part of any concluded contract: such statements may be made in the interests of extracting the best possible bargain from the give and take nature of negotiations. Further, any potential for contractual effect such statements may have could be negated by the express intentions of the parties. However, there is a tension between such situations and situations where (for one party at least) the contractual incorporation of a matter ventilated in negotiations may be of fundamental importance: circumstances could leave a question mark hovering over whether such matters were in fact mutually understood as having contractual effect. Given the need to define the boundaries of any contractual arrangement, the common law has drawn a distinction between representations having no contractual effect and those having such contractual effect: the textbooks classify the former as “mere representations” and the latter as “warranties” (for example, see McDermott, Contract Law, p.269).
Broadly, “warranty” means a term having contractual effect: more narrowly, it denotes a contractual term any breach of which will give rise to an entitlement to damages.
The manner in which the courts will approach the question of whether a representation constitutes a warranty or a matter having no contractual effect is outlined in Scales v. Scanlan (1843) 6 ILRCL 432 by Lefroy B at p.457 of the report:
“To make a warranty it is not necessary that the word “warrant” or “warranty” should be used. There was a time in law when it was otherwise… but it has long since been well settled, that words of affirmation, affirming a matter of fact, on the faith of
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which the party contracts, are as competent to make a warranty as any strict technical term.”
It is well established that the significance of the representation to the eventual entry into the contract on the part of either or other of the parties is a relevant factor in ascertaining the existence of a warranty: see Murphy v. Hennessey (1897) 31 ILT 404 and Gill v. Cape Contracts Ltd [1985] ILR 49.
In Dick Bentley Productions Ltd v. Harold Smith [1965] 2 All ER 65 at 67, Lord Denning MR stated:
“Looking at the cases once more, as we have done so often, it seems to me that if a representation is made in the course of dealings for a contract at the very purpose of inducing the other party to act on it, and it actually induces him to act on it by entering into the contract, that is a prima facie ground for inferring that the representation was intended as a warranty. It is not necessary to speak of it as being collateral. Suffice it that the representation was intended to be acted on and was in fact acted on. But the maker of the representation can rebut this inference if he can show that it really was an innocent misrepresentation, in that he was in fact innocent of fault in making it, and that it would not be reasonable in the circumstances for him to be bound by it.”
This statement of principle was approved and applied in the employment context by the Queen’s Bench Division of Northern Ireland in Gill v. Cape Contracts Ltd. [1985] ILR 49. In that case, the defendant company required around 40 insulation engineers to complete a contract in the Shetland Islands. The defendant company contacted their representatives in Northern Ireland who passed word among the insulation engineers employed by Harland and Wolff (which included the plaintiffs). The plaintiffs, who were married men in the main, were informed that they would receive a much higher wage than they were earning at Harland and Wolff to compensate for the difficult conditions working in the Shetlands would entail. They were told that the job would last for at least six months: as a result of the assurances they received, the plaintiffs applied for employment with the defendants. When the plaintiffs were informed that they were acceptable, they gave notice to Harland and
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Wolff which, irked at losing workers in this way, told the plaintiffs that they would not be employed there again. The opportunity in the Shetlands fell through due to industrial relations problems and the plaintiffs sued for damages. O’Donnell LJ held that the plaintiffs were entitled to damages for breach of a warranty by the defendants as the defendants failed to honour a representation to the plaintiffs forming a collateral contract that if they gave up their existing employment, they would be employed by the defendant company in the Shetlands for approximately six months at wages considerably in excess of their existing earnings. The court again reaffirmed the basic principle that if a representation is made in the knowledge and intention that the representee will act on it, it constitutes a warranty. In Gill, the court characterised the representations made by the defendants as representations which the defendant intended the plaintiff to act upon and upon which the plaintiffs did act. With regard to the role of the representations in the plaintiffs’ decision to switch their employment from Harland and Wolff to the defendant, the court remarked at p.51:
“The plaintiffs were in the main married men, in steady employment. To give up such employment on the mere expectation of obtaining employment at Sullum Voe, albeit with vastly increased wages, would have been foolhardy in the extreme. Both parties were aware of this and it appears to me that negotiations never proceeded on this basis. I do not believe that the plaintiffs would have terminated their employment with Messrs Harland & Wolff, had they been offered no more than a reasonable expectation of obtaining employment.” Accordingly, the court awarded damages for loss of bargain.
Negligent misrepresentation/ misstatement
The nature of misrepresentation required- will silence constitute a representation?
In Stafford v. Mahony, Smith and Palmer [1980] ILRM 53 at 64, Doyle J laid down the criteria for the action of negligent misrepresentation as follows:
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“In order to establish the liability for negligent or non-fraudulent misrepresentation giving rise to action there must first of all be a person conveying the information or the representation relied upon; secondly, that there must be a person to whom that information is intended to be conveyed or to whom it might reasonably be expected that the information would be conveyed; thirdly, that the person must act upon such information or representation to his detriment so s to show that he is entitled to damages.”
In principle, the Irish courts have accepted that silence or non-disclosure regarding facts or changes in circumstance not known to the other party can give rise to an obligation to disclose such facts and circumstances and such failure to disclose will constitute a misrepresentation. In Pat O’Donnell and Co v. Truck and Machinery Sales Ltd. [1998] 4 I.R. 191 at 202, O’Flaherty J remarked:
“In general, mere silence will not be held to constitute a misrepresentation. Thus, a person about to enter into a contract is not, in general, under a duty to disclose facts that are known to him but not to the other party. However, in certain circumstances, such a party may be under a duty to disclose such facts. A duty of disclosure will arise, for example, where silence would negate or distort a positive representation that has been made, or where material facts come to the notice of the party which falsify a representation previously made.”
The duty of care and contractual negligent misrepresentation
The substance of the plaintiff’s claim in this respect is that she was induced to enter the contract by the representation made by Mr. Drury that she would be allowed to work from home from lam until the first edition deadline: thereafter, she would work from the Dail.
In Securities Trust Ltd. v. Hugh Moore & Alexander Ltd. [1964] I.R. 417. Davitt P. defined the context in which liability may arise as follows at p. 421:-
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“… circumstances may create a relationship between two parties in which, if one seeks information from the other and is given it, that other is under a duty to take reasonable care to ensure that the information given is correct…”
In Esso Petroleum v. Mardon [1976] QB 801, Lord Denning MR formulated the duty of care in the following manner at p. 820:-
“… if a man, who has or professes to have special knowledge or skill, makes a representation by virtue thereof to another – be it advice, information or opinion – with the intention of inducing him to enter into a contract with him, he is under a duty to use reasonable care to see that the representation is correct, and that the advice, information or opinion is reliable. If he negligently gives unsound advice or misleading information or expresses an erroneous opinion, and thereby induces the other side to enter into a contract with him, he is liable in damages.”
Irish law reflects this line of thinking. In Forshall v. Walsh (unreported, High Court, Shanley J, 18th June, 1997), Shanley J stated at p.64 of the transcript:
“A party seeking damages for negligent misrepresentation must establish that the representative failed to exercise due care in making the representation as a result of which representation the person to whom it was made was induced to enter into the particular agreement and suffered damage in consequence of the inaccurate representation. Closely aligned to the claim of negligent misrepresentation is the wider tort of negligent misstatement. In relation to negligent misstatement the first matter a plaintiff must establish is that the defendant owed him a duty of care.”
The most recent affirmation of these principles in Irish law is King v. Aer Lingus plc [2002] 3 I.R. 481. So far as apposite to the present context, the facts and issues in this case were as follows. In 1989, Aer Lingus transferred its service and maintenance engineering component into a new subsidiary company, a process which involved lengthy and detailed negotiations between management and trade unions. The workforce felt that the only option was a secondment type arrangement where employees would retain their employment relationship with Aer Lingus while working in the subsidiary. As part of the negotiation process, the defendant company
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wrote similar letters to the plaintiffs, containing statements to the effect that in the event of TEAM (i.e. the subsidiary to which the service and engineering component was transferred) getting into financial difficulties, existing employees would continue to maintain the Aer Lingus fleet at a minimum. The agreement also contained a clause that the company would not cause or permit a lockout during the lifetime of the agreement. The plaintiffs transferred to TEAM, which ran into financial difficulty in 1993 and was eventually sold in 1997. 97% of the workforce transferred to the purchasing company: however, the plaintiffs were among those who instead decided to return to Aer Lingus. The plaintiffs failed to secure the fleet maintenance jobs they were assured they would retain in any circumstance in the 1989 letters and were working on clerical or operative positions on their return. They claimed that they were entitled to do the same kind of work that they had always done and claimed that insofar as Aer Lingus had failed to provide such work, the plaintiffs were entitled to damages for breach of the assurances given to them in 1990.
At p. 48 of the report, Kearns J held:
“The commitment contained in the letter… can only be seen, be it a representation or term of the agreement, as conveying that fleet maintenance work would be available ‘at a minimum’ with the defendant at the point of return for those workers who, having transferred to TEAM in 1990, opted to return to the parent company in 1998 against the backdrop of difficulties described in evidence. For the avoidance of any doubt, however, I find that the assurance contained in Mr. O’Neill’s’ letter of the 30th April, 1990, was both a representation and a term of the agreement and that, insofar as it may be regarded as a representation, the defendants, in making it, were under the duty of care alluded to in Hagen & ors. v. ICI Chemicals and Polymers Limited [2002] IRLR 31. It is proper to record that the defendants did not deny the existence of such a duty in a transfer of undertaking situation, which for all practical purposes existed in this case, but rather sought to argue that the plaintiffs had failed to plead any specific misrepresentations. The duty of care, it seems to me, it self-evident and no more than basic common sense, and a general plea of misrepresentation is sufficient in the circumstances.”
With regard to the question of damages, Kearns J held at p.489 of the report:-
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“… the plaintiffs are entitled to be treated as though they had never transferred to TEAM, that they are entitled to all appropriate increments or benefits on the basis that they earned and achieved the same seniority by 1998, as those Aer Lingus employees who did not transfer, that they were, on returning, entitled to such recognition and are now entitled to compensation in lieu thereof if they have suffered financial loss as a consequence of not getting such recognition.”
This case re-affirms two propositions. First, there is a duty of care to avoid making negligent representations or statements in pre-contractual, negotiation stages which have the effect of inducing a plaintiff to act to his/ her detriment. The case took place in a “transfer of undertaking” context, but there is nothing in the language of the judgment to suggest that the duty of care is confined to this situation. Where a new contract and terms of employment are being negotiated with prospective employees, there is a duty of care on the part of the prospective employer to avoid making negligent misrepresentations/ statements which are intended or have the effect of inducing an employee to leave his present position and which results in detriment to the employee. As regards the question of damages, Kearns J treated the employees as though the inducement to transfer to TEAM never took place: this is consistent with the basis on which damages for negligent misrepresentation are awarded in tort.
Is there any duty on the representee to ascertain the truth of the position before he acts on the representation?
The cases are uncertain in the context of claims for misrepresentation where the representation complained of induced a plaintiff to enter into a contract. In several cases, it has been suggested that when the representee is, or in the circumstances should be, informed or better informed of matters relating to the misrepresentation, any carelessness in reliance upon the misrepresentation will not deprive the misrepresentee of a remedy.
In Redgrave v. Hurd (1881) 20 Ch.D 1 at 13, it was held that it was not a “sufficient answer” to an action to rescind the contract between two solicitors for the
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purchase of a practice that the representee had the means of discovering and might, with reasonable diligence, have discovered the truth. In Nocton v. Ashburton [1914] AC 932, Lord Dunedin stated at p.962:
“No one is entitled to make a statement which on the face of it conveys a false impression and then excuse himself on the ground that the person to whom he made it had available the means of correction.”
In Strover v. Harrington [1988] Ch. 390, Sir Nicholas Browne-Wilkinson VC stated at p.410-
“… if it is once shown that a misrepresentation has been made, it is no answer for the representor to say that the representee has been negligent and could have found out the true facts if he had acted otherwise. The representee is under no duty of care to the representor to check on the accuracy of the representation. The representor is bound by his representations, however careless the representee may have been.”
At p.596 of Butterworth’s’ The Law of Contract, it is stated that “In Scotland, in contrast, Walker asserts a general rule to the contrary that there is no recission (reduction) if the error was attributable to the negligence of the plaintiff (pursuer). The true state of the law may lie between these positions. Courts engage in what has been described as ‘balancing the equities’.”
However, in the broader tort action of negligent misstatement, the court will enquire whether it was reasonable for the former to rely on the statements of the representor in the circumstances of the case: see Smith v. Eric S Bush [1990] 1 AC 831.
Degree of inducement necessary
The next question is the degree of inducement necessary to satisfy the requirement of inducement. There are four possible scenarios. In the first situation, the significance of the truth to the plaintiff of what turns out to be a misrepresentation may be such that, if the plaintiff representee appreciated the true position, they would not have entered the contract at all (see Horry v. Tate and Lyle Refineries Ltd [1982] 2
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Lloyd’s Rep 416 at 422, per Peter Pain J). This obviously meets the standard required for a legally effective inducement. The second situation is where, depending on the circumstances, a representation may be material to the decision of the plaintiff representee to enter into the contract without being decisive: if the representee had known the truth, the representee would still have been willing to conclude the contract, but perhaps on different terms. This will also suffice to meet the requirement of inducement: the best example of this in Irish law is Donnellan v. Dungoyne Ltd. [199511 ILRM 388.
The third situation is where, despite the relevance of the misrepresentation to the eventual contract, if the plaintiff representee had known the truth, the plaintiff would still have concluded the contract. This will not meet the standard of an operative inducement. The fourth possibility lies somewhere between the second and third possibilities: it cannot be said for certain whether the misrepresentation induced the plaintiff to enter the contract or not, but it might be said that the misrepresentation might have been material, if not decisive, to the decision to enter the contract.
In an action for negligent misstatement, the law requires that any loss be caused by the misstatement or misrepresentation. In other words, the effect of the misrepresentation (which constituted the inducement) must be causal in the sense of decisive (see Edgington v. Fitzmaurice (1885) 29 Ch.D 459 at 483, per Bowen LJ). The plaintiff who has been misled by the representation must have relied upon the representation in the sense that but for the misrepresentation, the plaintiff would not have made the contract at all, or at least not in the same terms: in short, the first and second situations of inducement outlined above.
Quantum of damages for negligent misrepresentation
The measure of damages applicable in the tort of deceit (i.e. where a fraudulent misrepresentation has been made) is also applicable to negligent misrepresentation. In Forshall v. Walsh (unreported, High Court, Shanley J, 18th June, 1997), Shanley J adopted the following passage from the judgment of Henchy J in Northern Bank Finance v. Charlton [1979] IR 149 at 199 (which occurred in the context of an action for fraudulent misrepresentation) and held that it was an accurate statement of the measure of damages in actions for negligent misrepresentation also:
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“As far as the tort of fraud or deceit is concerned, it is well settled that the measure of damages is based on the actual damage directly flowing from the fraudulent inducement, and that the award may include, in an appropriate case… consequential damages representing what was reasonably and necessarily expended as a result of acting on the inducement.”
Basis of Assessing Damages
An action for wrongful dismissal is an action for breach of contract: in essence, the breach complained of in such an action is that the plaintiff’s employment has not been terminated in accordance with his/ her contract or, where no such procedures exist, that the contract has not been terminated in accordance with fair procedures and the common law. The normal measure of damages in a wrongful dismissal action is the amount of salary the employee would have earned had he/ she been allowed to remain working for the balance of his contract, or for the period for which notice of termination should have been given in accordance with the contract. The same principle applies where no notice period as such has been incorporated into the contract: in such cases the common law implies a term into the contract that the employee may only be dismissed on giving reasonable notice and damages will be confined to the measure of the salary the plaintiff would have earned for the period of notice found reasonable in all the circumstances by the court. This has been the rule since Addis v. Gramophone Co. Ltd. [1909] AC 488.
However, the plaintiff has also made separate claims for breach of warranty and/ or negligent misrepresentation/ misstatement. The basis of awarding damages in these two contexts differs considerably from the attenuated scope for awarding damages in wrongful dismissal claims per se and is potentially far more remunerative: accordingly, it is necessary to outline the basis upon which the court will award damages in these contexts in some detail.
The common law courts have drawn a firm distinction between contract and tort in terms of awarding damages upon a finding of liability.
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In tort, the plaintiff is entitled to be put in the same position, as far as money can do so, as he would have been in had the tort not been committed. This has been established since Livingstone v. Rawyards Coal Co. (1880) 5 App. Cas. 25 at 39, per Lord Blackburn. This principle is the basis of awarding damages in tort in Irish law: subject to the application of the test of remoteness of damages laid down in Hadley v. Baxendale, the general purpose of an award of damages in a tort claim is to place the plaintiff in the same position as they had been before the commission of the tort in question: damages cannot be awarded for loss of bargain. In Foley v. Thermocement Products Ltd. (1954) 90 ILTR 92 at 98, the Supreme Court referred to restitutio in integrum as “the underlying principle by which courts are guided in awarding damages.”
In contract, however, the compensatable wrong consists not in the making but in the breach of the contract and accordingly the plaintiff is entitled to be placed in the position he would have been had the contract been performed. In other words, the plaintiff is entitled to recover damages for loss of bargain.
Experience has shown that the distinction between the principles upon which contract damages and tort damages are awarded outlined above tends to blur in cases involving misrepresentations of fact inducing entrance into contractual relations, which is the type of case at issue in the present proceedings: in such cases there is inevitable scope for pleading that the representation was a term of the contract entered into and that the misrepresentation leading to the non-observance of contractual obligations is an actionable tort. Where a plaintiff has been induced to enter into a contract by a misrepresentation of fact on the part of a defendant or his agent, if the representation forms part of the concluded contract (whether the representation constitutes a condition or a warranty is immaterial in this context), the plaintiff may sue for breach of contract and loss of bargain, which entitles the plaintiff to be placed in the same position as he/ she would have been had the representation of fact been true and obligations consequent upon the representation been performed by the defendant. However, if the representation is not a term of the contract, there is by definition no breach of contract and the plaintiff’s only remedy will lie in tort: the plaintiff will have a remedy in deceit where the misrepresentation is fraudulently made, and there will be a remedy in negligent misrepresentation where the
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misrepresentation was made negligently in the context of a duty of care owed by the representor to the plaintiff.
This vital distinction is established in Irish law. O’Hanlon J contrasted the basis upon which damages for misrepresentation in tort are awarded and the basis upon which damages for breach of warranty are awarded in McAnarney v. Hanrahan [1993] 3 I.R. 492 at 498 as follows-
“What now falls for consideration is the correct way in which damages should be assessed in a case of negligent misrepresentation. Damages in such cases are assessed by analogy with claims for damages for deceit. Where damages are claimed for fraudulent misrepresentation then they are assessed so as to put the plaintiff in the position he would have been in if the representation had not been made to him. This is different to the case where damages are being assessed in the case of a claim based on breach of warranty – then damages are assessed on the basis that the warranty was true. So, in the case of a sale of shares induced by fraudulent misrepresentation the normal measure of damages is the purchase price of the shares less their actual value at the time of acquisition (see McGregor, Damages, 15th Ed., paras. 17.18, 17.24 and 19.39) and in a case like the present one, where a plaintiff has been induced to enter into a contract for the purchase of land by a misrepresentation negligently made, the normal measure of damages is the price paid for the land less its actual value at the time of sale.”
O’Hanlon J followed his approach in McAnarney v. Hanrahan in Donnellan v. Dungoyne Ltd. [1995] 1 ILRM 388.
In this case, the plaintiff has made claims for breach of contract (at paragraph 5 of her Statement of Claim) and negligent misrepresentation (at paragraph 6 of her Statement of Claim). Applying the analysis above, if the plaintiff is entitled to succeed in her claim for negligent misrepresentation, the damages she is entitled to will be assessed on the assumption that she would not have left her position as political correspondent with Ireland on Sunday but for the misrepresentation that she would be permitted to work from home from lam until the first edition deadline and thereafter would work from the Dail for the remainder of the working day. In short,
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the plaintiff will not be entitled to damages based on the remuneration she would have earned had her contractual obligations with the Evening Herald been met.
If it is found that the representation with which the plaintiff takes most significant issue, i.e. that she would be allowed to work from home until the first edition deadline, is a term of the contract entered into by her and the defendant and that such term has been breached, the plaintiff will be entitled to damages awarded on the basis that the defendant would have observed the contract: in other words, the plaintiff will be entitled to damages based on the net pay she would have earned had the defendant allowed her to remain in her position at the Evening Herald.
The factual scenario in this case is but one illustration of the obvious possibility of the existence of a set of facts which conceivably give rise to concurrent liability in contract and tort. Given the differing principles upon which damages for contract and tort are awarded, should the defendant newspaper group be found liable for negligent misrepresentation and breach of warranty, the defendant will in effect be required to pay damages on the basis that the plaintiff both would have stayed in her position at Ireland on Sunday but for the misrepresentation and would still be with the Evening Herald had the defendant honoured its contractual obligation to allow the plaintiff to work from home until the first edition deadline every morning. In view of the possibility of concurrent liability (which in principle amounts to double compensation for the plaintiff), and the fact that the defendant has submitted that it is not open to the plaintiff to maintain an action in both contract and tort, the following appears to be the position in Irish law regarding concurrent liability in contract and tort.
Approaching the matter from first principles, the boundaries of contract and tort actions suggest that there is no conceptual objection to imposing liability in both contract and tort provided the facts as found meet the criteria of liability of the type of tort and contract action taken. Going back to first principles, the obvious condition precedent to an action for breach of contract is the existence of a contractual obligation: an action in tort has never required a contractual relationship between the parties, although the circumstances of a contractual obligation may give rise to a duty of care in tort over and above the normal “duty of care” (so to speak) to observe the
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terms of the agreement in the contractual context. To take the causes of action in tort and contract at issue in the present proceedings, it is not a requirement of an action for negligent misrepresentation that the parties enter into the contract, even if this is the effect of the representation. Secondly- again going back to first principles- in order to bring an action for negligent misrepresentation, it must be proved that the party making the representation owed a duty of care to the representee (Hedley Byrne v. Heller [1964] AC 465: see the first instance decision of O’Donnell v. Truck and Machinery Sales [1997] 1 ILRM 466 at 473, per Moriarty J. His decision was overturned on the facts by the Supreme Court but the Court did not question Moriarty J’s interpretation of the law). For an action for breach of warranty, the existence of the warranty as a contractual obligation is the only condition precedent to the finding of a compensatable breach: no duty of care of the standard required in tort is required.
The Irish courts have accepted that a defendant may be liable in both contract and tort: the law does not require a plaintiff to elect between the remedies and he may plead either or both. In Kennedy v. Allied Irish Banks plc [1998] 2 IR 48- at p.56 Hamilton CJ stated:
“…where a duty of care exists, whether such duty is tortious or created by contract, the claimant is entitled to take advantage of the remedy which is most advantageous to him subject only to ascertaining whether the tortious duty is so inconsistent with the applicable contract that, in accordance with ordinary principle the parties must be taken to have agreed that the tortious remedy is to be limited or excluded.”
In O’Donnell & Co. Ltd. v. Truck and Machinery Sales Ltd. [1998] 4 I.R. 191 at 198-99, O’Flaherty J remarked of the effect of the decision in Kennedy as follows:
“In the light of the decision of this Court in Kennedy v. Allied Irish Banks plc. [1998] 2 IR 48, it is clear that the law in this jurisdiction permits concurrent remedies. Indeed, the common law world would appear to be united in this regard: see, e.g., Henderson v. Merrett Syndicates Ltd. [1995] 2 AC 145 (The House of Lords); Central Trust Co. v. Rafuse (1986) 31 D.L.R. (4th) 481 (The Supreme Court of Canada); Bryan v. Maloney (1995) 182 C.L.R. 609 (The High Court of Australia); Aluminium Products (Qld.) Pty Ltd v. Hill [1981] Qd.R. 33 (a decision of the full
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Court of the Supreme Court of Queensland) and Macpherson & Kelley v. Kevin J. Prunty & Associates [1983] 1 V.R. 573 (a decision of the full Court of the Supreme Court of Victoria); Rowlands v. Collow [1992] 1 N.Z.L.R. 178 (The High Court of New Zealand). In relation to the American position, see Fleming, The Law of Torts, 8th ed. (1992) p.187; Prosser and Keeton on the Law of Torts, W. Keeton. Gen. Ed., (1984) page 444.
Thus, where under the general law a person owes a duty to another to exercise reasonable care and skill in some activity, a breach of that duty can give rise to a claim in tort notwithstanding the fact that the activity is the subject matter of a contract between them. There is no general duty of non-cumul des obligations such as is found in civil law systems.”
O’Hanlon J saw no obstacle to awarding damages for breach of warranty and negligent misrepresentation in Donnellan v. Dungoyne [1995] 1 ILRM 385. In that case, a plaintiff was interested in setting up his son in a shoe retailing business in Laois Shopping Centre, Portlaoise and engaged in negotiations from February 1991 with the letting agents of the defendant company, which owned the shopping centre in question, to lease a unit in the centre. In November 1991, the letting agents represented to the plaintiff that virtually all the units of the centre had been leased to tenants and would be occupied and trading by Christmas 1991. The defendant company executed a 35 year lease of a unit in the shopping centre to the plaintiff’s son. In January 1992, the plaintiffs realised that the centre had not been fully let and along with other tenants sought further rent-free periods from the defendants as compensation for the poor performance of the plaintiff’s son’s shoe retailing business: they argued that the centre attracted insufficient numbers of customers and that this caused the failure of the plaintiff’s son’s shoe business. Inter alia, on the facts of the case, O’Hanlon J found that the representation that the units in the shopping centre had been fully let was a contributing factor in the decision of the plaintiff and his son to embark upon the lease, but not decisive. However, the importance of the case in the present context is the tacit suggestion of O’Hanlon J that the remedies of breach of warranty and negligent misrepresentation are not mutually exclusive: at p.397 of the report, he remarked:
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“… I am of opinion that a case has not been made out for recission of the lease, as sought in the civil bill, but merely for damages for breach of warranty and negligent misrepresentation, as happened in the case of Esso Petroleum v. Mardon [1976] QB 801, and McAnarney v. Hanrahan [1993] 3 IR 492 to which I have been referred by counsel, and which I propose to follow.”
Reasonable notice
Where a termination procedure has been agreed and incorporated into the contract of employment, the courts are disinclined to substitute their own view of what is otherwise required to lawfully terminate the contract for the agreed termination procedure: accordingly, even where such a termination procedure does not specify that the employee in question may be dismissed on reasonable notice, the courts will not imply a term to this effect into the contract on the basis that the express agreement regarding termination is inconsistent with the implication of any other terms: see Grehan v. North Eastern Health Board [1989] IR 422.
However, in the converse situation- i.e. that where no termination procedure or notice period has been agreed between the parties- the law implies a term into every contract of employment where a notice period has not been expressly stipulated that reasonable notice must be given to terminate the contract. What constitutes “reasonable notice” is a matter of fact for the court to determine in light of all the circumstances. How the court will approach the question of what constitutes “reasonable notice” in any given context was set out by Tucker J in Warren v. Super Drug Markets Ltd. (1965) 54 DLR (2d) 183 as follows:
“The rules for determining what is a reasonable notice were set out by the full court in Speakman v. Calgary (City) (1908) 9 WLR 264, at 265, 1 Alta LIZ 454, by Beck, J. … viz.:
`… the question, what is a reasonable notice, depends upon the capacity in which the employee is engaged, the general standing in the community of the class of persons, having regard to their profession, to which the employee belongs, the probable facility or difficulty the employee would have in procuring other employment in case of
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dismissal, having regard to the demand for persons of that profession, and the general character of the services which the engagement contemplates.”
The plaintiff and defendant have cited a significant number of cases in Irish and English law concerning newspaper employees. However (leaving aside those employees whose terms and conditions of employment are dealt with under statute or where a termination procedure and notice period have been agreed and incorporated into a contract) no profession, job or category of employee is treated differently or favourably in the context of the rules used in determining what a reasonable notice period is: the cases are merely specific illustrations of generally applicable rules.
One common thread running through the cases is that “persons in well paid and prestigious jobs are entitled to relatively lengthy notices.” (Forde, Employment Law (2nd edition, p.166). In Lyons v. M.F. Kent & Co. (International) Ltd [1996] ELR 103, an accountant employed by a large construction company who spent much of his time on foreign assignment was held entitled to one year’s notice. In McDonald v. Minister for Education [1940] IR 316, a teacher was held entitled to six months’ notice. It seems the status and position of the employee in question has been the most significant factor in deciding notice entitlements in recent Irish case law. Among the most significant examples of such are: Carvill v. Irish Industrial Bank [1968] IR 325 (where a managing director of a small bank was held entitled to one years’ notice); Tierney v. Irish Meat Packers (1989) ILT 5 (where a group credit controller of a meat company was held entitled to six months notice); Robinson v. Corneil (unreported, High Court, Keane J, 10th April 1992) (where the responsibilities attached to a managerial position were held to justify six months’ notice).
Of interest in the context of the plaintiff’s situation in this case is Lowe v. Walter (1892) 8 TLR 358, which offers the nearest analogy to the plaintiff’s own situation in terms of the position of the person whose notice entitlements were being decided. The foreign correspondent to the Times was held to be entitled to six months’ notice.
A typical example of the length of period the courts are inclined to stipulate for positions of responsibility in the print media is Bowman v. Holten Press Ltd. [1952] 2 All ER 1121. A journalist and photographer were held entitled to six
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months. Much of the report of the case was taken up with the question of whether the plaintiff was employed under a contract of service or a contract for services and there is no guidance on the issue of reasonable notice: the report briefly recounts how, after finding that the plaintiff was employed under a contract of service the court determined that a reasonable notice period was six months and held that giving the plaintiff two week’s notice to leave was a breach of contract. However, it seems that this decision was based upon the status of the employee more than any other factor.
A good illustration of the relevance of the responsibilities of a position to the question of entitlement to reasonable notice is O’Reilly v. Irish Press (1937) 71 ILTR 194. The plaintiff was the chief subeditor of the Irish Press. He failed to prove a wage custom entitling him to six months’ notice, but the court gave him six months based on the responsibilities attaching to his role: the Court noted that on the evidence before it the success or failure of a newspaper depends to a great extent upon the competence, judgment and the taste of the chief subeditor. The plaintiff had 15 subeditors below him and in addition to being chief subeditor, the plaintiff was the night editor.
It seems proof of a custom regarding notice periods in a particular industry or sector is a significant factor for the court to weigh in deciding the matter and will appreciably influence the court’s thought processes: a reading of some of the cases on reasonable notice suggests that customs prevalent in the industry were of central significance to the court’s decision. However, the customs of a particular industry, if such are proved to exist upon the evidence, will not be decisive of the question of what amounts to reasonable notice: it is but one of the factors identified in Warren v. Superdrug Markets Ltd. to be taken into account in assessing the circumstances of the plaintiff’s employment and the notice period that such circumstances warrant.
One case where a custom of the particular industry proved significant in the court’s decision as to reasonable notice is O’Connell v. The Gaelic Echo Ltd. (1958) 92 ILTR 156. A member of the editorial staff of a monthly magazine was held to be entitled to at least one month’s notice and evidence was given on behalf of the plaintiff by a representative of the NUJ that the customary period for notice in the absence of express agreement in the Dublin area was one month for reporters, three months for sub-editors and six months for chief sub-editor. Another case emphasising the importance of custom is George Edwardes (Daly’s Theatre) Ltd. v. Comber (1926) 42 TLR 247. In that case, an actor had an option agreement with Daly’s
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Theatre whereby the theatre could require the actor to play the part of the Ambassador in the play Katja the Dancer in a West End theatre by giving the actor two weeks’ notice before the end of the season. The option was duly exercised, and the concluded agreement contained a clause that the actor would not perform for any other company or production for the run of the play. The actor subsequently tried to take up an acting engagement with another company before the end of the play’s run. An application by the plaintiff theatre company to restrain the defendant actor from taking this offer up was successful: the court rejected a submission that the agreement was terminable by fourteen days’ notice. Had the agreement been indefinite, this submission would have been accepted: however, the court accepted evidence that “so well known and established is the custom in the profession that a mere engagement of a person to play a part in a certain play in London or the provinces constitutes a contract for such engagement for the run of the play in London or the provinces constitutes a contract for such engagement for the run of the play in London or for the tour, as the case may be, and there is no power on either side to determine the contract during the said run.” Another such case is Grundy v. Sun Printing and Publishing Association (1916) 33 TLR 77, where the court accepted that the custom for a newspaper editor was a twelve-month notice period and that a sub-editor was entitled to a six-month notice period and determined the period of reasonable notice these persons were entitled to accordingly. Yet another example is Fox-Bourne v. Vernon and Co. (1894) 10 TLR 647 where a six-month notice period for an editor was found to be reasonable by reference to the established custom for editors: in the same vein, see also Chamberlain v. Bennett (1892) 8 TLR 234 (where a subeditor of newspaper was held to be entitled to six months based on evidence of a custom).
Claim for damages for injury to reputation
At paragraph 6 of her Statement of Claim, the plaintiff claims that she “… has suffered and continues to suffer loss, damage, expense and distress and in particular, has suffered injury to her reputation as a journalist. Further, the plaintiff has been damaged by reason of the misrepresentation and/ or negligent misstatement of the defendant company, its servants or agents.”
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At common law, the general rule for many years was that damages for the manner or unfortunate circumstances of the dismissal were not recoverable in a common law action for wrongful dismissal. This was laid down in Addis v. Gramophone Company Ltd. [1909] AC 488, where a plaintiff was awarded a sum of money in excess of the outstanding salary due to him for the notice period: the implication of this award was that the extra sum was compensation for the humiliating manner in which he had been dismissed. The House of Lords held that the plaintiff was only entitled to the salary he would have earned during the notice period, but the stressful and humiliating nature of the circumstances surrounding his dismissal could not be permitted to influence the court’s jurisdiction to award damages. Lord Loreburn LC commented:
“If there be a dismissal without notice the employer must pay an indemnity, but that indemnity cannot include compensation either for the injured feelings of the servant or for the loss that he may sustain from the fact that his having been dismissed of itself makes it more difficult for him to obtain fresh employment.”
It was held that the employee may have a separate action in tort for defamation or nervous shock, but damages in the wrongful dismissal context remained limited to the notice period. Early Irish authority suggested that Irish law would develop along the lines of the position in Addis: in Kinlen v. Ulster Bank Ltd. [1928] IR 171 at 184, Kennedy CJ stated:
“The plaintiff has relied on two matters for the purpose of aggravating the damages to which he is entitled. In the first place, he said that the bank manager not only refused him the money to which he was entitled, but refused it contemptuously, and with contumely. Indeed, I have no doubt that the plaintiff was very badly treated indeed by the bank. In the second place, he urged that by reason of the first refusal he was subjected to great humiliation in raising money to pay his workmen. He had to pawn some of his personal belongings to raise part of the money, and he had to borrow part of it from a friend. These matters were greatly pressed upon us, and they evoke much sympathy with the plaintiff, but they are not matters which can be considered as elements of damages. It is very clearly settled, both in this country and in England, and affirmed in many cases, that in actions for breach of contract damages may not be given for such matters as disappointment of mind, humiliation, vexation, or the like, nor may exemplary or vindictive damages be awarded. See Breen v. Cooper IR 3 CL 621;
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Hamlin v. Great Northern Railway 1 H & N 8; Addis v. Gramophone Co., Ltd. [1909] AC 488″
In Malik v. BCCI [1998] AC 20 (HL), the plaintiffs successfully claimed what are colloquially known as “stigma damages”, their dismissal occurring in the wake of their employer’s involvement in fraudulent banking practices. The plaintiffs issued proceedings on the basis of their difficulty in finding alternative employment stemming from their association with BCCI. The House of Lords held that, as a result of the bank’s fraudulent activities, the bank had breached the implied term of trust and confidence in the employment relationship and this breach was sufficient to make the employer liable for the financial loss suffered by the plaintiffs: such losses were not limited to any notice period. However, Malik does not seem to have altered the Addis principle: the award of damages in Malik was based upon the breach of the implied term of trust and confidence and in any event the basis upon which the award of damages was made was purely financial. Nevertheless, the case is authority for a limited right of recovery where an employee’s future job prospects have been damaged by the employer.
The High Court in England departed from the Addis position in Cox v. Phillips Industries Ltd. [1976] 1 WLR 638, but in 1985 the Court of Appeal reaffirmed the position in Addis in Bliss v. South East Thames Regional Health Authority [1987] 1 ICR 700. In Johnson v. Unisys Ltd. [2001] 2 All ER 801, the House of Lords endorsed its decision in Addis. In Johnson, the plaintiff had been summarily dismissed and had already been awarded damages for unfair dismissal by an industrial tribunal. He sought further damages to compensate him for the losses he suffered due to the manner in which he was treated and dismissed. The plaintiff tried to invoke the decision in Malik by claiming that he was entitled to such damages on the basis of breach of the implied term of trust and confidence in that the employer failed to afford him a proper opportunity to defend himself in disciplinary proceedings and failure to abide by the company’s disciplinary code. The lower courts struck out his proceedings and the House of Lords dismissed the appeal, holding that where an employee was wrongfully dismissed, any damages awarded could not take account of the manner of the dismissal or any adverse consequences thereof for the plaintiff. The decision appears to have been based upon policy considerations: Lord Hoffmann considered that the plaintiff’s claim was tantamount to an invitation to the court to
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create a right to unfair dismissal at common law parallel to the statutory regime. He held at p.821 of the report that “…for the judiciary to construct a general common law remedy for unfair circumstances attending dismissal would be to go contrary to the evident intention of parliament that there should be such a remedy but that it should be limited in its application and extent.”
Lord Hoffmann also considered whether the implied term as to trust and confidence could have any application or relevance at the dismissal stage. He concluded that the term had always been concerned with the preservation of the employment relationship and not its termination and to extend its scope to dismissal contexts would have been “inappropriate and unnatural.” He held that at common law there was no obligation on an employer who had decided to end the employment relationship only for good cause: this was a matter for unfair dismissals legislation. This analysis regarding the scope of the implied term as to trust and confidence was subsequently applied by the Court of Appeal in Boardman v. Copeland County Council (unreported, Court of Appeal, 13th June 2002).
It is of interest to note that other common law jurisdictions have rejected Addis. In Stuart v. Armourguard Security [1996] 1 NZLR 484, the New Zealand High Court held that it was an implied term of the employment contract that an employee should not be dismissed in a manner likely to cause distress or loss of reputation, without proper cause. In that case, a regional manager who was peremptorily dismissed after he declined to tender his “non-negotiable resignation” was awarded general damages not limited by the Addis principle.
Conclusions:
I am satisfied that the plaintiff made it perfectly plain to Mr. Drury that she could not work the morning shift for the first edition from the offices of the Evening Herald: accordingly, Mr. Drury knew that if such an arrangement was not in place, the plaintiff could not undertake the job. I am satisfied that Mr. Drury did not express the serious reservations that were held by Senior Management as regards the proposed working arrangements and equally that he did not advise Senior Management that the plaintiff could not take up the position if the proposed morning working arrangements were not agreed or proved unworkable. In my view, this is the crucial point in the
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case. I am satisfied that Mr. Drury was anxious to retain the services of the plaintiff and never foresaw that there would be any difficulty in the matter.
I take the view that the agreement as regards the morning working conditions was a fundamental term of the agreement reached between Mr. Drury and the plaintiff and that it constituted a warranty and an inducement to the plaintiff to give up her contractual arrangement with Ireland on Sunday. Furthermore, I am satisfied that the plaintiff left her job with Ireland on Sunday to join the Evening Herald as a result of the representation made by Mr. Drury that the plaintiff could work from home for the first edition of the Evening Herald. I am also satisfied on the evidence as a matter of probability that without the assurance on the morning working arrangements, the plaintiff would not have taken up employment with the defendants.
I fully accept that due to unforeseen circumstances, namely the departure of Mr. Drury as editor of the Evening Herald the agreed working conditions were immediately in jeopardy, leading to the termination of the plaintiff’s employment on 17th April, 2000.
I take the view that no blame attaches in this regard to the plaintiff and in any event there does not appear to me to have been any way open to the plaintiff to check on the accuracy of the representation which was made to her by Mr. Drury and she simply trusted him and relied on what he said. Accordingly, I come to the conclusion that the plaintiff is entitled to damages for breach of warranty as against the defendants.
I am satisfied that Mr. Drury owed the plaintiff a duty of care to avoid making a negligent representation in the precontractual negotiation stages which had the effect of inducing the plaintiff to act to her detriment in the circumstances that arose.
I accept that Mr. Drury may not have anticipated a problem and that he may have mentioned the fact of Mr. Brennan not being particularly happy with the proposed arrangements: in my view, however, Mr. Drury’s silence about the serious reservations expressed to him by senior management should have been communicated by him to the plaintiff, in compliance with the duty of care which he owed to her to enable her to fully assess the position, especially since Mr. Doyle was not prepared to reduce the terms of the plaintiff’s morning working arrangements to writing.
I take the view that Mr. Drury failed in the duty of care he owed to the plaintiff and made a negligent representation to her by positively affirming the morning working arrangements and failing to advise the plaintiff by his silence of the
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fact that senior management had serious reservations about the position regarding the early morning working arrangements.
Following on the decision of Doyle J. in Stafford v Mahony, Smith and Palmer [1980] I.L.R.M. 53, at 64, I am satisfied that there was, in the particular circumstances of this case, a person (Mr. Drury) conveying the information and representation relied upon and further that the relevant information was conveyed to the plaintiff and that she acted to her detriment upon the information and representation made to her.
Insofar as the misrepresentation in the particular circumstances of this case relates to a failure to disclose a material fact, it is quite clear to me that a duty of disclosure did arise because Mr. Drury’s silence in effect negated and distorted the positive representation that he made that the working arrangements were agreed to, he having discussed the matter with senior management. I accept that there is an argument to be made on the defendants’ behalf that the serious reservations on the part of senior management may not have falsified the representation previously made, but the reality of the situation is that Mr. Drury knew that the plaintiff could not take up the position if the morning working arrangements were not agreed to and he also knew that senior management were expressing serious reservations about the morning working arrangements, so that in effect, in my view, he was conveying to the plaintiff an inaccurate representation as to the true background position.
In my view, Mr. Drury owed the plaintiff a duty of care: he failed in this regard and accordingly I am satisfied that the defendants are guilty of a negligent misrepresentation in these circumstances and that the plaintiff is entitled to damages arising there from.
On the issue of reasonable termination of the plaintiff’s contract of employment, I take the view that both the N.U.J. current agreement and the situation that pertained to Mr. Dowling when he left the defendant company to join the Sunday Times are different from the situation that faced the plaintiff when she was approached by the defendant company because she had in place a contractual arrangement and if a termination period had been discussed, undoubtedly it would have been an important factor for her consideration. In any event, it was never discussed or indeed touched on in any way and there was no provision in place as to an agreed period of notice of termination.
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In all the circumstances of this case, including the factual background as to how the plaintiff came to be employed by the Defendant, the importance which Mr. Paul Drury attached to the plaintiff’s employment, her esteemed professional ability, the fact that she was moving from a job to take up this position and most importantly the difficulty that she would undoubtedly face as a Political Correspondent in achieving a similar position in the greater Dublin area lead me to the conclusion that a reasonable period of notice of termination of the plaintiff’s employment with the Defendant Group would be six months or alternatively six months’ net loss of earnings in lieu of notice.
Insofar as the plaintiff has advanced a claim for damages for injury to reputation, I do not consider that in the particular circumstances of this case the plaintiff has made out such a case for loss of reputation against a background where no aspersion was cast on the plaintiff’s capacity and integrity as a journalist and, in particular, as to her role as political correspondent. The reality of the situation, I believe, is that the defendants were well intentioned to the plaintiff and, as I have already stated, in a different set of circumstances the arrangement would probably have worked very well. Furthermore, if it were possible for the plaintiff to have worked for the first edition from the offices of the Evening Herald, it is quite clear that the arrangement would have continued. Accordingly, I conclude that there is no basis for any claim for injury to the plaintiff’s reputation and, in these circumstances, it is not necessary for me to consider the legal issue as to whether or not there is a remedy in Irish law in respect of a valid claim for damages for loss of reputation arising from a termination of a contract of employment.
My findings bring about a situation where I have to assess damages both for breach of warranty and for negligent misrepresentation. I am satisfied following the judgment of Hamilton C.J. in Kennedy v Allied Irish Banks PLC [1998] 2 IR 48 at p. 56, that the claimant in these proceedings is entitled to take advantage of the remedy which is most advantageous to her, subject only to ascertaining whether the tortious duty is so inconsistent with the applicable contract that in accordance with ordinary principles the parties must be taken to have agreed that the tortious remedy is to be limited or excluded. In the particular circumstances of this case I am satisfied that the plaintiff is entitled to seek damages for concurrent remedies both in respect of breach of warranty and negligent misrepresentation.
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I am further satisfied following the decision of O’Hanlon J. in McAnarney v Hanrahan [1993] 3 I.R. at 498 that damages to which the plaintiff is entitled for negligent misrepresentation are to be assessed on the basis that the plaintiff would not have left her position as political correspondent with Ireland on Sunday but for the misrepresentation and these damages will be based on the plaintiff’s net loss of earnings and dependent on the remuneration she would have earned if she had remained on with Ireland on Sunday.
Insofar as the plaintiff is entitled to damages for breach of warranty, she is entitled to damages based on net loss of earnings and dependent on the remuneration she would have earned had she remained on in her position at the Evening Herald.
In assessing the appropriate level of damages for negligent misrepresentation, and breach of warranty I conclude that the appropriate measure is two years’ net loss of earnings less the net remuneration as earned by the plaintiff from alternative sources during this period.
Insofar as there is an element of dispute as regards the appropriate taxation levels relating to the plaintiffs earnings I propose to reply on the figures as produced by Mr. Russell because from the taxation perspective he has been for a number of years the plaintiffs accountant and has been responsible for her tax returns and I consider it probable that he is more familiar with the taxation situation than the person who produced the figures on behalf of the defendants.
Furthermore while I accept that on or about the 24th day of March, 2000 the plaintiffs salary was reduced by the exclusion of the fifth day due to the intervention of the Trade Union the plaintiffs contract with the defendants was for a salary of IR£45,000 and having regard to the unusual circumstances that brought about the change I propose for the purpose of assessing damages herein to disregard that change of circumstances and to rely on the original contract.
The plaintiff is entitled to six months’ notice of termination of her employment with the Evening Herald or, alternatively, six months’ net pay in lieu thereof, which I calculate to be a sum of €18,637.06.
In respect of the plaintiff’s claim for negligent misrepresentation, I assess damages in the sum of €33,227.61 being two years’ net loss of earnings from the plaintiff’s position with Ireland on Sunday less remuneration derived from alternative sources.
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In respect of the plaintiff’s claim for damages for breach of warranty, I assess damages in the sum of €52,266.00, being two years’ net loss of earnings from the plaintiff’s position with the Evening Herald less remuneration derived from alternative sources.
Accordingly, while the plaintiff is entitled to succeed in her claim as against the defendants under a number of headings, she is not entitled to recover damages under all of the headings because the claim arises out of the same set of circumstances and cause of action. The plaintiff is only entitled to recover damages under one heading of claim but she is entitled to recover damages from her optimum position which in the particular circumstances is in respect of her claim for breach of warranty and accordingly I award the plaintiff €52,266.00 damages.
O’Donovan v Over-C Technology Ltd & ANOR
[2020] IEHC 291 (12 June 2020)
JUDGMENT of Mr Justice David Keane delivered on the 12th June 2020
Introduction
1. This is an employment injunction application, brought against the background of an action for wrongful dismissal challenging both the decision made on 7 January 2020 by the first defendant/respondent, Over-C Technology Limited (‘Over-C Technology’), to terminate the employment of the plaintiff/applicant, Donal O’Donovan, and its subsequent confirmation of that decision on 17 January, when it deemed Mr O’Donovan’s appeal against dismissal to have been withdrawn. The second defendant/respondent, Over-C Limited (‘Over-C’), an English-registered company, is the parent of Over-C Technology. Thus, collectively, Over-C Technology and Over-C are the defendants.
Procedural history
2. On 29 January, Mr O’Donovan issued proceedings. A memorandum of appearance was entered on behalf of each of the defendants on 5 and 6 February, respectively. On 18 February, Mr O’Donovan delivered a statement of claim in which he seeks, among other reliefs: declarations that his dismissal was unlawful and, hence, invalid and that he remains employed by the defendants; permanent injunctions requiring the defendants to acknowledge and maintain the position as such; and damages against the defendants for breach of contract, breach of duty, and breach of his constitutional right to fair procedures.
3. On 31 January, Mr O’Donovan sought, and was granted, leave ex parte to effect short service of the present motion. He filed and issued a notice of motion on 31 January, initially returnable to 6 February on the direction of Reynolds J. The principal interlocutory reliefs that Mr O’Donovan seeks are injunctions pending trial in terms of the permanent injunctions that he claims as substantive relief. The application is grounded on an affidavit sworn by Mr O’Donovan on 30 January. Michael Elliot, the chief executive officer (‘CEO’) of each of the defendants, swore an affidavit in reply on 14 February, supplemented by a short affidavit of John Boylan, a partner in the firm of solicitors representing the defendants, sworn on the same date. Mr O’Donovan swore a second affidavit on 18 February, as did Mr Elliot one week later. Still further affidavits sworn by Mr O’Donovan on 26 February and Mr Elliot on 10 March were later exchanged. Finally, Liam Wade, the general manager and company secretary of Over-C Technology, swore a short affidavit on its behalf on 25 May that I gave the defendants leave to file in court. I have considered the contents of each of those affidavits.
4. The defendants gave an undertaking to the court (O’Connor J) on 6 February that they would not appoint another person to the role of CFO pending the determination of the present application.
5. The application was argued before me on 25 May. The defendants had not yet delivered a formal defence.
Background
6. Mr O’Donovan is a chartered management accountant. By letter dated 30 May 2019 (‘the employment offer letter’), Mr Elliot offered him the position of chief financial officer (‘CFO’) of ‘our Irish company Over-C Technology and Over-C Ltd in the UK’.
7. On 31 May 2019, Mr O’Donovan signed a contract with Over-C Technology, headed ‘Statement of Main Terms of Employment’ (‘the contract’), which recites that it forms part, and sets out the main terms, of his ‘Contract of Employment’. The contract states that Mr O’Donovan’s employment with Over-C Technology as CFO was to begin on 22 July 2019, and that the CEO was to be his line manager.
8. Among the other express terms of the contract, are the following:
‘PROBATIONARY PERIOD
An initial probationary period of six months applies to this position. During this period your work performance will be assessed and, if it is satisfactory, your employment will continue. However, if your performance is not up to the required standard, we may either take remedial action or terminate your employment.
…
TERMINATION TO BE GIVEN BY EMPLOYER: One month in the first year, [t]hree months thereafter.
…
DISCIPLINARY RULES AND PROCEDURES
The disciplinary rules and procedures that apply to your employment are shown in the Employee Handbook to which you should refer.
DISCIPLINARY APPEAL PROCEDURE
The disciplinary rules and procedures which form part of the Contract of Employment incorporate the right to lodge an appeal in respect of any disciplinary action taken against you. If you wish to exercise this right, you should apply either verbally or in writing to the General Manager or the CEO within five working days of the decision you are complaining against.’
9. Mr O’Donovan has exhibited the Employee Handbook that was furnished to him in conjunction with the contract. It contains little in the way of disciplinary rules and nothing on disciplinary procedures.
10. Mr O’Donovan began work as CFO of Over-C Technology in Cork on 6 August 2019. Between 13 December 2019 and 6 January 2020, he was on annual leave.
11. Upon his return from leave on 7 January, Mr O’Donovan was called to a meeting with the CEO, Mr Elliot. At that meeting, Mr Elliot informed Mr O’Donovan, that his employment with Over-C Technology was terminated with immediate effect and that he was to receive one month’s pay in lieu of notice.
12. As CEO of Over-C Technology, Mr Elliot later wrote to Mr O’Donovan, confirming that decision. The letter (for ease of reference, ‘the letter of termination’) is dated 8 January, though Mr O’Donovan contends that post office records show it was sent by registered post on Friday, 10 January, and delivered on Monday, 13 January. The letter states that Mr O’Donovan’s performance in the role of CFO was sub-standard and had been identified to him as such by Over-C Technology board members at earlier meetings. In particular, it alleges that Mr O’Donovan had: (a) provided an inflated and, hence, misleading projected sales figure at a board meeting on 2 December 2019; (b) failed to prepare adequately for a board meeting on 19 December 2019; and (c) failed to answer a question from the board about the company’s ‘basic cash position.’ The letter concludes by confirming that Mr O’Donovan’s employment with Over-C Technology had been terminated the day before with immediate effect in line with the terms of his contract of employment and within his probationary period and that he would receive one month’s pay in lieu of notice.
13. Meanwhile, on the afternoon of 8 January, Mr O’Donovan emailed Mr Elliot, asserting that, under his contract of employment, he had an entitlement to appeal the decision to terminate his employment. Just over two hours later, Mr Elliot emailed in reply:
‘You are correct that there is an [a]ppeal process. A member of our [b]oard of [d]irectors will hear your [a]ppeal and this will be arranged shortly. You will be contacted next week to agree a date and location for this meeting.’
14. On 14 January, Eileen Moloney, a director of Over-C Technology, wrote to Mr O’Donovan in the following terms:
‘I’m in receipt of your mail of 8th Jan in which you wish to appeal against the decision to dismiss you on 7th January. This was confirmed in writing to you in the letter dated 8th January (attached).
I write to confirm that I will hear your appeal, the hearing details are as follows:
Date: Fri 17th January
Time: 14.30 hours
Venue: Over-C Boardroom, 12 South Mall [Cork]
The hearing will be conducted by way of a review of the original decision. The appeal hearing will be chaired by me in the presence of a Company witness, who will take notes.
You may wish to be accompanied at the appeal. If you wish to be accompanied, please contact me on the number below, by Thursday 16th at 17.00 hrs to advise me of the name of the person, so that any necessary arrangements can be made.
The decision of this appeal hearing is final and there is no further right of review. If you have any queries concerning the content of this letter please contact me.’
15. Mr O’Donovan received that letter via an email sent to him by Ms Moloney at 6.23 p.m. on 14 January. He replied by email on 16 January, opening by stating that the time fixed for the proposed appeal hearing was not convenient for him or his legal representative, then raising a number of procedural issues, before concluding with the assertion that Over-C Technology must address those issues ‘as quickly as possible as delay will allow matters to fester and worsen.’
16. Ms Moloney responded by letter, dated 17 January, stating in material part:
‘I note you do not now wish to proceed with the appeal today.
I now confirm your dismissal stands.’
17. On 24 January, Mr O’Donovan’s solicitors wrote a letter before action to each of the defendants, claiming that his dismissal ‘for misconduct’ was unlawful and had been effected in breach of his contract of employment. On behalf of Mr O’Donovan, they called upon the defendant to: (a) withdraw the allegations of ‘misconduct’ contained in Mr Elliot’s letter of 8 January; (b) make a full written apology to Mr O’Donovan; and (c) reinstate him as CFO, by close of business on 28 January 2020, failing which proceedings for wrongful dismissal would issue and injunctive relief would be sought.
18. The defendants’ solicitors responded by email on 30 January 2020, stating that: (a) Mr O’Donovan had received one month’s pay in lieu of notice and his employment would finish on 7 February 2020; (b) Mr O’Donovan’s employment had been terminated during his initial six-month probationary period for reasons clearly set out by Mr Elliot; and (c) Mr O’Donovan’s claims were without foundation and would be vigorously defended.
19. Here, it is convenient to consider briefly two issues that the defendants have raised on affidavit.
20. First, their solicitor Mr Boylan has averred that the statement in that email that Mr O’Donovan’s employment would end on ‘7 February 2020’ was a typographical error and should have read ‘7 January 2020’ because that is the date upon which Mr Elliot informed Mr O’Donovan that his employment was terminated with immediate effect. It seems to me that whether Mr O’Donovan was summarily dismissed with immediate effect on 7 January 2020 or was given one month’s notice of dismissal on that date in accordance with the relevant term of his contract of employment (so that his employment finished on or about 7 February 2020), depends in significant part on the true interpretation of the letter of termination (‘your employment with Over-C Technology was terminated with immediate effect in line with the terms of your Contract of Employment within your stated [p]robationary [p]eriod’); see, for example, the decisions of the England and Wales (‘EW’) Court of Appeal in I. Brindle v H W Smith (Cabinets)[1972] IRLR 125 and R J Dedman v British Building and Engineering Appliances Ltd [1973] IRLR 379. While that may or may not be an issue at trial, I cannot see that it is material to the determination of the present application.
21. Second, Mr Elliot has averred that the effect of the term of Mr O’Donovan’s contract of employment stipulating a six-month probationary period was to create, in effect, a six-month fixed term contract, subject to extension or continuation only upon satisfactory performance. In so far as it is necessary to address that assertion for the purpose of the present application, there is a strong case to be made that Mr O’Donovan’s contract of employment was one of indefinite duration, subject to the entitlement of his employer to terminate his employment if his performance was ‘unsatisfactory’ or ‘not up to the required standard’ during his initial six-month probationary period; that is to say, a contract that would continue unless terminated on the ground of unsatisfactory performance, rather than one that would expire after six-months unless extended on the ground of satisfactory performance, as Mr Elliot claims.
22. To conclude the chronology of events that are not in dispute, Mr O’Donovan did receive the payment of one month’s salary on 30 January, which was the day after the these proceedings issued and the day before the present motion did.
The case for an employment injunction
23. In these proceedings, Mr O’Donovan advances several different causes of action beyond breach of contract. There is a claim in misrepresentation, alleging that he was induced to enter the defendants’ employment in reliance upon statements that were untrue concerning both the size of the defendants’ revenue stream and client base and his eligibility as CFO to acquire equity in the business. And there is a claim in defamation, alleging that the dismissal letter of 8 January 2020 is defamatory in content and was published to third persons. Those claims, which are denied by Mr Elliot on behalf of the defendants, are of no relevance to the present application.
24. Also of no relevance, are Mr Elliot’s averments, on behalf of the defendants, that Mr O’Donovan has acted in breach of their confidence – a claim that Mr O’Donovan denies. Mr Elliot deposes to having recently become aware of the unauthorised disclosure by Mr O’Donovan on 8 November and 4 December of certain of the defendants’ confidential commercial information to a third party, an identified business consultant. In response, Mr O’Donovan avers that, at all material times, his interactions on behalf of the defendants with that business consultant were known to, and authorised by, Mr Elliot, a claim that, in turn, Mr Elliot denies. Mr Elliot has since expanded on the defendants’ claims by suggesting that Mr O’Donovan had wrongly sent the defendants’ confidential information to his personal email account. Mr O’Donovan’s position is that he accessed his work email account on his home computer with the defendants’ express consent and that he has offered to make his computer available for inspection. According to Mr Elliot, Over-C Technology may issue separate proceedings against Mr O’Donovan for breach of contract or breach of confidence, or both.
25. The part of Mr O’Donovan’s case, as pleaded, that underpins the present application for injunctive relief is his claim that his dismissal was effected in breach of contract and in breach of his constitutional right to fair procedures, such that (in addition – or as an alternative – to damages) he is entitled to a declaration that he continues to be employed by the defendants as CFO or that his purported dismissal from that position is invalid, or both.
26. From his pleadings, it is clear that Mr O’Donovan rejects the assertion that his performance in the role of CFO was unsatisfactory or, differently put, that it was below the required standard. Further, he pleads that the defendants never informed him of any issue with, or concern about, the standard of his performance, prior to his meeting with Mr Elliot on 7 January 2020. Mr O’Donovan and, on behalf of the defendants, Mr Elliot have joined issue on those two propositions at length over three exchanges of affidavit. Indeed, Mr Elliot now avers to a number of alleged instances of unsatisfactory or sub-standard performance by Mr O’Donovan in the role of CFO in addition to those identified in the letter of termination, each of which Mr O’Donovan denies or rejects on oath.
27. Quite apart from any issue concerning his conduct or performance as CFO, Mr O’Donovan goes on to plead that the procedures used to effect his dismissal breached both the express and implied terms of his contract of employment. According to Mr O’Donovan, the express terms breached are those dealing with ‘disciplinary rules and procedures’ and ‘disciplinary appeal procedure’, set out earlier in this judgment. In addition, Mr O’Donovan contends that the defendants breached an implied term of that contract that those rules and procedures would be fair and in accordance with the requirements of natural and constitutional justice.
28. Mr O’Donovan’s central contentions are that the defendants breached those terms by: (a) effecting his dismissal before affording him an opportunity to appeal; (b) failing to provide him with adequate notice of the arrangements for the conduct of the appeal, once that entitlement was conceded after his dismissal; and (c) wrongly and unreasonably deeming his appeal to have been withdrawn when informed by him that the arrangements they had unilaterally made for it were not convenient. Through Mr Elliot’s averments, the defendants join issue with those claims, adopting the position (simply stated) that Mr O’Donovan: (a) was offered an appeal (albeit only upon requesting one after he was informed of his summary dismissal); (b) was given adequate notice of the arrangements they had made for the conduct of his appeal; and (c) did, in effect, withdraw that appeal by writing to inform them that those arrangements were not convenient for him but without proposing alternative ones.
29. Finally, in describing the issues between the parties, I do not overlook Mr Elliot’s averment on behalf of the defendants that, despite Mr O’Donovan’s express plea that he was employed by both defendants (as reflected in the terms of the employment offer letter signed by Mr Elliot), his contract of employment was with Over-C Technology alone (as reflected in the contract that Mr O’Donovan signed).
The test for an employment injunction
30. The proper approach to an application for an interlocutory injunction was recently restated in Merck Sharp & Dohme Corp v Clonmel Healthcare Ltd [2019] IESC 65 (Unreported, Supreme Court (O’Donnell J; Clarke CJ, McKechnie, Dunne and O’Malley JJ concurring), 31 July 2019) (‘Merck’).
31. The general principles remain those identified by Lord Diplock in American Cyanamid Co v Ethicon Ltd [1975] AC 396 (HL) (at 407-9) and approved by the Supreme Court in Campus Oil v Minister for Industry (No. 2) [1983] 1 IR 88 (O’Higgins CJ and Griffin J, Hederman J concurring) (‘the Campus Oil principles’).
32. At the risk of crude over-simplification, I consider those principles to be that the applicant must establish that: (1) there is a serious question to be tried on the applicant’s entitlement to a permanent injunction; (2) the balance of convenience favours the grant of interlocutory relief, which requires, but is not limited to, a consideration of whether damages would be an adequate and effective remedy for an applicant who fails to obtain interlocutory relief but later succeeds in the action at trial and, if not, whether the applicant’s undertaking to pay damages would be an adequate and effective remedy for a respondent against whom interlocutory injunctive relief is granted but whose defence to the action succeeds at trial. While Lord Diplock’s speech in American Cyanamid was ambiguous on whether the adequacy of damages was a consideration antecedent to, or part of, that of the balance of convenience, the judgment of O’Donnell J in Merck (at para. 35) has now clarified that it is preferable to consider adequacy of damages as part of the balance of convenience, thus emphasising the flexibility of the remedy.
33. Where a mandatory injunction is sought, such as where an applicant seeks an injunction restraining dismissal (which is, in substance, an injunction mandating the continuation of an employment relationship), the Campus Oil principles are subject to the significant refinement that an applicant must establish at least a strong case, likely to succeed at the hearing of the action, and not merely surmount the lower threshold of establishing a serious question to be tried; Maha Lingam v Health Service Executive [2005] IESC 89, [2006] 17 ELR 137 (per Fennelly J at 140). Mr O’Donovan accepts – correctly, in my view – that the strong case test is the one that he must meet in order to obtain the relief that he seeks in the present application.
34. In Merck, O’Donnell J pointed out that it would be an error to treat the Campus Oil principles as akin to statutory rules (at para. 34), before later outlining the steps that might usefully be followed in considering an interlocutory injunction application (at para. 64):
‘(1) First, the court should consider whether, if the plaintiff succeeded at the trial, a permanent injunction might be granted. If not, then it is extremely unlikely that an interlocutory injunction seeking the same relief upon ending the trial could be granted;
(2) The court should then consider if it has been established that there is a fair question to be tried, which may also involve a consideration of whether the case will probably go to trial. In many cases, the straightforward application of the American Cyanamid and Campus Oil approach will yield the correct outcome. However, the qualification of that approach should be kept in mind. Even then, if the claim is of a nature that could be tried, the court, in considering the balance of convenience or balance of justice, should do so with an awareness that cases may not go to trial, and that the presence or absence of an injunction may be a significant tactical benefit;
(3) If there is a fair issue to be tried (and it probably will be tried), the court should consider how best the matter should be arranged pending the trial, which involves a consideration of the balance of convenience and the balance of justice;
(4) The most important element in that balance is, in most cases, the question of adequacy of damages;
(5) In commercial cases where breach of contract is claimed, courts should be robustly sceptical of a claim that damages are not an adequate remedy;
(6) Nevertheless, difficulty in assessing damages may be a factor which can be taken account of and lead to the grant of an interlocutory injunction, particularly where the difficulty in calculation and assessment makes it more likely that any damages awarded will not be a precise and perfect remedy. In such cases, it may be just and convenient to grant an interlocutory injunction, even though damages are an available remedy at trial;
(7) While the adequacy of damages is the most important component of any assessment of the balance of convenience or balance of justice, a number of other factors may come into play and may properly be considered and weighed in the balance in considering how matters are to be held most fairly pending a trial, and recognising the possibility that there may be no trial;
(8) While a structured approach facilitates analysis and, if necessary, review, any application should be approached with a recognition of the essential flexibility of the remedy and the fundamental objective in seeking to minimise injustice, in circumstances where the legal rights of the parties have yet to be determined.’
35. Finally, in approaching the test I must apply to the evidence that I have attempted to summarise, I am conscious of Lord Diplock’s admonition in American Cyanamid (at 407):
‘It is no part of the court’s function at this stage of the litigation to try to resolve conflicts of evidence on affidavit as to facts on which the claims of either party may ultimately depend nor to decide difficult questions of law which call for detailed argument and mature considerations. These are matters to be dealt with at trial.’
A serious question to be tried?
36. In his statement of claim, Mr O’Donovan pleads that he was dismissed for misconduct. In particular, he pleads that, in asserting in the letter of termination that he had provided an inflated and, hence, misleading sales figure to the board, the defendants meant – and were dismissing him for the reason that – he had deliberately misled the board and, hence, was dishonest and untrustworthy. Further, Mr O’Donovan goes on to plead that this in turn by innuendo meant that he was in breach of the Code of Conduct of the Institute of Management Accountants. Thus, Mr O’Donovan makes the case that he was dismissed on grounds of alleged misconduct, without the benefit of the appropriate disciplinary procedures, including an appeal.
37. Through the averments of Mr Elliot, the defendants adamantly deny that Mr O’Donovan’s dismissal was based on any allegation of misconduct. They point to the express terms of the letter of termination, which makes no reference to misconduct and specifically states instead that Mr O’Donovan’s performance in his role was, variously, sub-standard and unacceptable and that his employment had been terminated in line with the terms of his contract, ‘within his stated probationary period’.
38. Remember, the ‘probationary period’ term in the contract signed by Mr O’Donovan required Over-C Technology to assess his performance within the initial six months of his employment and, if it was not up to the required standard, permitted Over-C Technology to either take remedial action or terminate his employment. In that context, Mr O’Donovan pleads that at no time during his employment was he ever informed of any issue with his performance nor was he afforded any, or any adequate, opportunity to address the alleged shortcomings identified by Mr Elliot at their meeting on 7 January and in the letter of termination.
39. Remember, also, that Mr O’Donovan emailed Mr Elliot on 8 January, stating ‘as per the contract there is an appeal process’, and Mr Elliot emailed in reply on 9 January, stating ‘[y]ou are correct that there is an [a]ppeal process.’ Mr Elliot has since averred, in the affidavit that he swore on behalf of the defendants on 25 February, that Mr O’Donovan had no contractual entitlement to an appeal but was offered one ‘as a matter of courtesy’. The circumstances in which the defendants came to deem Mr O’Donovan’s appeal to have been withdrawn have already been described.
40. Mr O’Donovan pleads that, what he describes as, the ‘disciplinary’ process established by the defendants was unfair and conducted in breach of both his entitlement to natural and constitutional justice and the implied contractual obligation of mutual trust, good faith and confidence between employer and employee.
41. On the basis of the evidence and arguments just described, I am not satisfied that Mr O’Donovan has established a strong case, likely to succeed at the trial of the action, that he was dismissed, wrongly and in breach of his entitlement to fair procedures, for ‘misconduct’. Having regard to the present state of the evidence and, in particular, the express terms of the letter of termination, it seems significantly more probable that the ground for his dismissal was that of poor performance during his probationary period.
42. The question that then arises is whether Mr O’Donovan’s dismissal on that ground was properly effected in accordance with the terms of his contract. On that issue, I conclude, on the current state of the evidence, that Mr O’Donovan has established a strong case, likely to succeed at trial, that it was not. As matters stand, there is nothing to suggest that either the instances of alleged sub-standard or unsatisfactory performance identified in the letter of termination or any of the various other instances of alleged poor performance since averred to by Mr Elliot were ever drawn to Mr O’Donovan’s attention as performance issues, either orally or in writing, prior to the meeting of 7 January at which he was summarily dismissed on that basis.
43. Of course, Mr O’Donovan’s case at trial will be stronger if he can persuade the court that the express terms of the contract dealing with ‘disciplinary rules and procedures’ and ‘disciplinary appeal procedure’ directly apply to allegations of sub-standard or unsatisfactory performance raised in the context of the ‘probationary period’ term of the contract. But, even if Mr O’Donovan cannot do so, there remains a strong case that, in the specific circumstances of his contractually required performance assessment, he was entitled to a level of procedural fairness that he did not receive, most obviously in the context of both a right to be heard and a right of appeal.
44. In referring to the specific circumstances of that assessment, I have in mind principally the following: first, that it was contractually mandated and capable of resulting in either remedial action by Over-C Technology or the termination of Mr O’Donovan’s employment if his performance was found not to have reached a required standard; second, the specific nature of Mr O’Donovan’s probation, whereby, as a qualified management accountant, he was directly appointed to a senior role, rather than – as is more frequently the case with probationary employment – required to successfully complete an initial course of training or instruction in the skills required for an entry-level position; third, the potential seriousness of an adverse performance assessment, reputationally and economically, for a qualified person engaged in a professional role; and fourth, the exchange of email correspondence on 8 and 9 January, whereby, in response to Mr O’Donovan’s assertion of a contractual entitlement to an appeal, Mr Elliot acknowledged there was an appeal process, without any qualification to the effect that it was being offered only as a courtesy and not as a contractual entitlement. In those circumstances, I judge that there is a strong case to be made that Mr O’Donovan was dismissed for sub-standard performance during his probationary period without being afforded his implied contractual right to be heard as part of that assessment or to appeal against an adverse assessment, or both.
45. The strength of Mr O’Donovan’s case in this regard derives from the defendants’ express reliance in the letter of termination on the allegation that his performance in the role of CFO was sub-standard and unacceptable and the express statement in that letter that his employment had been terminated in line with the terms of his contract, ‘within his stated probationary period’. Thus, while – on the present state of the evidence – it seems to me that the termination of Mr O’Donovan’s employment was not a ‘misconduct’ dismissal, nor was it merely a dismissal on notice.
46. As Ms Kimber SC for the defendants sought to emphasise and Ms Bolger SC for Mr O’Donovan candidly acknowledged, the traditional common law position is that a contract of employment can be terminated by an employer on reasonable notice whether for good or bad reason (or, indeed, no reason at all); see, for example, the judgment of Fennelly J in Maha Lingam (at 140). The contract in this case contains an express term that the notice of termination to be given by the employer shall be ‘[o]ne month in the first year.’ However, as Fennelly J went on to observe (at 141):
‘… [W]here a dismissal is by reason of an allegation of misconduct by the employee, the courts have in a number of cases at any rate imported an obligation to comply with the rules of natural justice and give fair notice and a fair opportunity to reply.’
47. In Carroll v Bus Atha Cliath/Dublin Bus [2005] 4 IR 184 (at 208), Clarke J explained that, while in general an employer may, if contractually free to do so, dismiss an employee for any reason or no reason at all, it is no less the case that, where an employer chooses to rely upon stated misconduct as the reason for dismissal, an obligation arises to conduct the process leading to that determination in accordance with the principles of natural justice.
48. Although, on the evidence before me, I am not persuaded that this is a misconduct dismissal case, nonetheless, depending upon the terms of the relevant contract, the same obligation may apply to a ‘poor performance’ dismissal, as Laffoy J made clear in Naujoks v Institute of Bioprocessing Research & Training Ltd [2006] IEHC 358, [2007] ELR 25.
49. The facts of the present case are different to those in Hughes v MongoDB Ltd [2014] IEHC 335, (Unreported, High Court (Keane J), 6 June 2014). The employer in that case gave did not give an adverse performance assessment as the reason for the employee’s dismissal but relied solely on its asserted contractual entitlement to dismiss on notice. The letter of termination went on to state that the employee would be provided with a standard reference. That is not the position here, where the reason given for dismissal was sub-standard or unsatisfactory performance during the probationary period; a claim that has since been amplified and expanded upon in the three affidavits that Mr Elliot has sworn on behalf of the defendants.
50. I have found that Mr O’Donovan has established a strong case that: (1) the stated reason for his dismissal was his sub-standard or unsatisfactory performance during his probationary period; (2) a fair procedures obligation in the conduct of the relevant performance assessment arises under the terms of his contract of employment; and (3) there was a breach of that obligation in this case.
51. In view of the interlocutory nature of the present application, it will suffice to say only that I am not persuaded that the analogy the defendants seek to draw between the ‘probationary period’ term of the contract now at issue and the statutory power to terminate the services of a civil servant working in a probationary capacity under s. 7 of the Civil Service Regulation Act 1956, as amended, is a valid one, sufficient to deprive Mr O’Donovan’s case of the strength necessary to obtain relief. That is to say, I am not persuaded of the force of the argument that an employer’s entitlement to dismiss a probationary employee, regardless of the specific terms of the contract between them, is the same as, or co-extensive with, that of the appropriate State authority to terminate the services of probationary civil servant under that Act as a matter of public law. Thus, I glean no assistance from a consideration of the line of authority relied upon by the defendants in that regard, culminating in the decision of the High Court (per Barron J) in The State (Daly) v Minister for Agriculture [1987] 1 IR 165.
52. For the same reason, I cannot see that the decision of the Supreme Court in Hickey v Eastern Health Board [1991] 1 IR 210 – holding that the rules of natural justice had no application to a decision to dismiss, by reason of redundancy rather than misconduct, a person who, by operation of the provisions of the Health Act 1970, was a temporary officer of the health board – is of any relevance to the present case, which must be determined by reference to the proper construction of the contract between the parties as a matter of private law and which does not involve a decision that is, or can be, susceptible to judicial review.
53. I can find no meaningful analogy between the position here and that which arose before O’Connor J in Earley v Health Service Executive [2015] IEHC 841, (Unreported, High Court, 27 November 2015), another authority upon which the defendants seek to rely. That decision was subsequently reversed on appeal in Earley v Health Service Executive [2017] IECA 158, (Unreported, Court of Appeal (Hogan J; Finlay Geoghegan and Peart JJ concurring), 5 May 2017) and an injunction was ultimately granted reinstating the appellant to the contractual position with the HSE from which she had been transferred; Earley v Health Service Executive (No. 2) [2017] IECA 207. As the decision of each court in that case made clear, the issue in cases of this kind is always the proper construction of the relevant contract.
The balance of convenience or least risk of injustice
54. Following the steps suggested in Merck, it seems to me that: (1) if Mr O’Donovan succeeded at trial, a permanent injunction might well be granted directing his reinstatement, or restraining his dismissal on the ground invoked, in the absence of a performance assessment conducted in accordance with his entitlement to fair procedures; and (2) this is not a case in which the grant of an interlocutory injunction will per se determine the issues between the parties, thus rendering any trial superfluous, although I do not overlook the tactical significance attributed to the grant or refusal of interlocutory relief in employment cases, as evidenced by the limited proportion of them that ultimately proceed to trial. Clarke J observed in Bergin v Galway Clinic Doughiska Ltd [2008] 2 IR 205 (at 212) that, when dealing with employment injunctions, it would be ‘somewhat naïve not to surmise that a significant feature of the interlocutory hearing is concerned with both parties attempting to establish the most advantageous position from which to approach the frequently expected negotiations designed to lead to an agreed termination of the contract of employment concerned.’
55. It is thus necessary to consider (3) how the matter should be arranged pending trial, with due regard to the balance of convenience and the balance of justice. This requires a consideration (4) of the adequacy of damages, bearing in mind that this is an employment, rather than a commercial, claim, and that the former may not require (5) the same robust scepticism about the claimed inadequacy of an award of damages as the latter. In considering the adequacy of damages, it is also necessary to take into account (6) as a factor any difficulty there may be in assessing damages. It is also necessary to consider (7) any other factors that come into play and must be weighed in the balance in considering what arrangement is fairest pending trial, bearing in mind there may be no trial. Finally, as an overarching principle, the application must be approached recognising (8) the essential flexibility of the remedy and the fundamental objective of seeking to minimise injustice prior to the determination of the legal rights of the parties at trial.
56. There is not the slightest doubt in this case that a relationship of mutual trust and confidence no longer exists between Mr O’Donovan and the defendants. Mr O’Donovan claims, among other things, that he was induced to enter the defendants’ employment by misrepresentation and that, in the manner and circumstances of his dismissal, they have traduced his reputation. The defendants claim, among other things, that Mr O’Donovan’s performance as CFO was sub-standard and that, while in that position, he wrongly disclosed sensitive commercial information to a third party in breach of confidence. That is, to put it no higher, a very weighty factor against the grant of an interlocutory order that would require, rather than permit, the defendants to allow Mr O’Donovan to resume his duties as CFO; see, for example, Harte v Kelly [1997] 8 ELR 125; and Bergin, already cited.
57. Mr O’Donovan apprehends that he will suffer reputational, as well as direct financial, damage in consequence of a performance assessment that he claims was conducted in breach of his entitlement to fair procedures and was wrong in its result. While it is possible to assess damages for reputational injury, that might not be a precise and perfect remedy in the circumstances.
58. More fundamentally, Mr O’Donovan has averred, albeit tersely, that without remuneration pending trial, he will be unable to discharge his debts as they fall due; including his monthly mortgage payments, insurance premiums and the expenses associated with rearing a young family. In Brennan v Irish Pride Bakeries (In receivership) [2017] IECA 107, (Unreported, Court of Appeal (Finlay Geoghegan J; Irvine and Hedigan JJ concurring), the Court of Appeal approved the following passage from the judgment of Laffoy J in Giblin v Irish Life & Permanent plc [2010] ELR 173 (at 184):
‘As a general proposition, in the context of employment injunctions, the jurisprudence of the courts has developed over the last quarter century so that it is generally considered that the prospect of an award of damages following the trial of the action is not an adequate remedy for a successful plaintiff who has been deprived of his salary pending the trial of the action.’
59. The defendants argue that, should an injunction be granted and should they later succeed in their defence to Mr O’Donovan’s claims, his undertaking to pay damages in that event may not adequately compensate them for two reasons; first, because he has not provided sufficient detail of his means to enable the court to assess the extent to which it is realistic for him to fully compensate them; and second, because, they claim, not unreasonably, that their inability to appoint a new CFO is causing them ongoing damage – as averred to in the affidavit sworn on their behalf by Mr Wade, the general manager of Over-C Technology – that may not be easy to quantify.
60. In support of the first reason, the defendants pray in aid the decision of O’Sullivan J in Martin v An Bord Pleanála [2002] 2 IR 655. However, that was not an employment injunction case, nor was it one in which it could have been argued, as it may be here, that any impecuniosity there may be on the part of the applicant has been caused or contributed to by the alleged wrongful conduct of the respondent(s).
61. There is obvious force in the argument that the defendants suffer significant ongoing prejudice through being without a CFO. In view of what is, in all probability, the irretrievable breakdown of the relationship of mutual trust and confidence between the parties, it is highly improbable that Mr O’Donovan will ever resume that role, even if he is entirely successful at the trial of the action. The substantive remedy he seeks is the annulment of the decision to terminate his employment during his probationary period for sub-standard performance. Mr O’Donovan acknowledges that the defendants are nonetheless entitled to terminate his employment on one month’s notice in accordance with the terms of his contract of employment. As is their right, the defendants have chosen to join issue on Mr O’Donovan’s claim that they were not entitled to dismiss him in the manner and circumstances that they did for sub-standard performance. But it is on that issue that I have found that Mr O’Donovan has made out a strong case.
A Fennelly Order
62. With those considerations in mind, I judge that the balance of convenience (that is to say, the least risk of injustice) lies in making a modified form of what has become known as a Fennelly order, after the decision of Costello J in the case of Fennelly v Assicurazioni Generali S.P.A. (1985) 3 ILT 73, (Unreported, High Court (Costello J, ex tempore), 12 March 1985). In its most basic form, that is an interlocutory order directing an employer to pay an employee all salary and other benefits to which the employee is entitled under the relevant contract of employment, on the undertaking of the employee to carry out such duties under that contract as the employer may require.
63. The defendants submitted in the course of argument that a Fennelly order is an exceptional relief that the court should be slow to grant. For my part, I share the view expressed in Kirwan, Injunctions: Law and Practice (2nd edn, 2015) (at 9-206) that ‘given the Fennelly orders evolutionary path, and the way in which subsequent cases followed Fennelly, it can now be said with some confidence that whatever about its status at the time Costello J delivered his judgment [in 1985], it can no longer be considered an exceptional – in either sense of the word – case at all’.
64. On behalf of Mr O’Donovan, Ms Bolger SC invited the court to consider instead an interlocutory injunction directing the defendants to conduct a fresh assessment of Mr O’Donovan’s performance during the probationary period in a manner consistent with his entitlement to fair procedures or, alternatively, directing that Mr O’Donovan’s appeal against the existing adverse assessment must proceed. In my judgment that would be inappropriate. It would alter, rather than preserve, the status quo pending trial. More significantly, it would involve prejudging what is likely to be a central – if not the central – issue at trial, namely, whether Mr O’Donovan’s dismissal was indeed effected in breach of his contractual entitlement to fair procedures. In addition, in the absence of the necessary determination at trial concerning the nature and extent of that entitlement, if it is found to exist, any such order would be difficult, if not impossible, to police.
65. It should not be necessary to reiterate that, in dealing with the present interlocutory application, I am not purporting to finally decide any of the legal or factual issues in controversy between the parties in the action. As Hardiman J observed in Dunne v Dun Laoghaire-Rathdown County Council [2003] 1 IR 567 (at 581), on a full hearing the evidence may be different and more ample and the law will be debated at greater length.
Summary
66. In my judgment, Mr O’Donovan has established a strong case that he had an implied contractual right to fair procedures in the assessment of his performance during his probationary period, which right was breached in the manner and circumstances of both the decision on 7 January to summarily dismiss him for sub-standard performance and the decision on 17 January to deem his appeal against that decision to have been withdrawn.
67. I am satisfied that the balance of convenience or, differently put, the least risk of injustice favours the making of a Fennelly order in the following terms:
(1) That the defendants are restrained from repudiating Mr O’Donovan’s contract of employment pending the trial of the action on the following specific terms:
(i) That Mr O’Donovan is to be paid his salary for a period of six months from the end of January 2020 (and any applicable bonus and other benefit arising during that period), on the provision by him of an undertaking to carry out any of the duties of CFO that the defendants may require of him.
(ii) That the defendants are not required to assign any of the duties of CFO to Mr O’Donovan at any time pending the trial of the action but, insofar as they do beyond the period of six months from the end of January 2020 and pending the trial of the action, must pay his salary (and any applicable bonus and other benefit) accordingly.
(iii) That the defendants may choose to put Mr O’Donovan on leave of absence rather than assign any duties to him, but that is without any prejudice to their obligation at (i) above.
(iv) That the defendants are released from their undertaking not to replace Mr O’Donovan by the appointment of a new CFO and may do so as they see fit.
68. I have fixed the period during which the defendants must pay Mr O’Donovan’s salary as one of six months, rather than the entire period pending trial, because, in light of Mr O’Donovan’s acknowledgment that the relationship of mutual trust and confidence between the parties has irretrievably broken down, his claim is, in reality, one for a fair termination process rather than for reinstatement in the role of CFO. It is also significant that, as Carroll J noted in Orr v Zomax Ltd [2004] IEHC 47, (Unreported, High Court, 25 March 2004) (at para. 58), on appeal to the Supreme Court in Fennelly, payment of salary was limited to six months.
Final matters
69. On 24 March 2020, the Chief Justice and Presidents of each court jurisdiction issued a joint statement recording their agreement that, in light of the COVID-19 pandemic and the need to minimise the exposure of persons using the courts to unnecessary risk, the default position until further notice is that written judgments are to be delivered electronically and posted as soon as possible on the Courts Service website. The statement continues:
‘The parties will be invited to communicate electronically with the Court on issues arising (if any) out of the judgment such as the precise form of order which requires to be made or questions concerning costs. If there are such issues and the parties do not agree in this regard concise written submissions should be filed electronically with the Office of the Court within 14 days of deliver subject to any other direction given in the judgment. Unless the interests of justice require an oral hearing to resolve such matters then any issues thereby arising will be dealt with remotely and any ruling which the Court is required to make will also be published on the website and will include a synopsis of the relevant submissions made where appropriate.’
70. Thus, I direct the parties to correspond with each other to strive for agreement on any issue arising from this judgment, including the issue of costs. In the event of any disagreement, short written submissions should be filed in the Central Office of the High Court within 14 days, to enable the court to adjudicate upon it.
Appearances
Marguerite Bolger SC for the plaintiff/applicant, with William Prasifka BL, instructed by Kelly Kennedy & Co, Solicitors.
Clíona Kimber SC for the defendants/respondents, with Aoife Beirne BL, instructed by BDM Boylan Solicitors.
Result: Interlocutory injunction granted.
Howard v. University College Cork
[2000] IEHC 138 (25th July, 2000)
JUDGMENT OF Mr Justice O’Donovan delivered on the 25th day of July 2000.
1. This is an Application by the Plaintiff, who is currently the Professor and head of the Department of German at the University College Cork, for interlocutory injunctions restraining the Defendants, their servants or agents from;
(a) taking any steps whatsoever to remove the Plaintiff from her post as head of the Department of German at University College Cork,
(b) taking any steps towards appointing a person, other than the Plaintiff, to the post of head of the Department of German at the University College Cork and
(c) howsoever from interfering with or prohibiting the Plaintiff from performing her role and functions as head of the Department of German at University College Cork.
2. In addition, the Plaintiff seeks such further or other reliefs as to the Court shall seem meet.
3. The Plaintiffs Application is made in the context of proceedings which were initiated by Plenary Summons on the 16th day of March 2000 and in respect of which the Statement of Claim was delivered on the 19th of May 2000. In the proceedings, the Plaintiff claims a variety of reliefs arising (inter alia) from allegations of harassment and bullying which the Defendants allege have been made against the Plaintiff and, as a result, have caused a hostile environment to be created within the Department of German at University College Cork and the manner in which the Defendants purported to investigate those allegations. In particular, the Plaintiff complains that the Defendants have failed to vindicate her position as Professor of German and head of the Department of German at University College Cork and, accordingly, that she is apprehensive that the Defendants will remove her from the post of head of the Department of German at the said University. In those circumstances, the reliefs sought by the Plaintiff in these proceedings include injunctive relief similar to that which is the subject matter of this Application.
4. In the course of the hearing of the Application, I had evidence which satisfied me that the Plaintiff had been appointed to the post of Professor of German at the Defendant University by the Senate of the National University of Ireland on the 8th of July 1993. The said appointment was made pursuant to statute 162 of University College Cork made by the governing body of the College on the 19th day of January 1993 pursuant to powers in that behalf conferred by the Irish Universities Act 1908 and in chapter 1(3) of the said statute it is provided that, on initial appointment, a Professor of German shall be head of the Department of German for a period of at least 5 years. Accordingly, it would appear to follow that, when initially appointed Professor of German, the holder of that office is also required to perform the duties of head of the Department of German for a period of at least 5 years but without any additional emolument and, so far as the Plaintiff is concerned, that was the position which obtained on her appointment to the post of Professor of German at University College Cork on the 8th of July 1993.
5. At an early stage in the course of the hearing of this Application it appeared to me that, in the light of the contents of a letter dated the 23rd March 2000 addressed to the Plaintiff by Mr. Aidan Moran, Registrar and Vice-president for Academic Affairs at University College Cork in which (inter alia) Mr. Moran stated
“I am advised that your initial 5 year appointment as department head expired on the 1st of January 1999”
6. The Defendants were maintaining that, as of the 1st of January 1999 the Plaintiff had ceased to be head of the Department of German at the University College Cork. If that were so, it seemed to me that the Defendants were in error because, as I interpret Chapter 1(3) of Statute 162 of University College Cork, the office of head of the Department of German when vested in the Professor of German on initial appointment was not for a fixed term and, accordingly, could not be determined by effluxion of time. However, I was informed by Mr. Stewart, Senior Counsel on behalf of the Defendants, that the Defendants accept that the office of head of the Department of German which was vested in the Plaintiff on the 8th of July 1993 could not determine by effluxion of time and, accordingly, it was accepted by the Defendants that the Plaintiff is the current holder of that office. However, it was submitted on behalf of the Defendants that, if the Defendants followed procedures for the selection/appointment of Department Heads which were approved at a meeting of the governing body of University College Cork held on the 29th day of February 2000, and, in so doing, appointed someone other than the Plaintiff to be head of the said Department, the Plaintiffs position as head of the Department would automatically determine. In that regard, Counsel on behalf of the Defendants submitted that a determination by the governing body at University College Cork in accordance with the procedures for selection/appointment of Department Heads laid down on the 29th of February 2000 could be made without notice to the Plaintiff, without explanation for the reason therefore and that it did not require observance of the Principles of Natural Justice. In that regard, Counsel for the Defendants submitted that the post of head of the Department of German at University College Cork did not involve employment as such, because it was inevitably associated with a position on the staff of the Department, such as Professorship, and, accordingly, the person exercising the functions of the head of the Department was not, in performing that role, an employee and, therefore, termination of that post did not involve dismissal from employment, as it is ordinarily understood. In those circumstances, it was submitted on behalf of the Defendants that Principles of Natural and Constitutional Justice are not relevant when considering the termination of the post of head of the Department of German at University College Cork and need not be observed. On behalf of the Plaintiff, it was submitted that if, as suggested on behalf of the Defendants, the head of the Department of German at University College Cork was not an employee, then the post was meaningless whereas the fact of the matter is, as appears from the Affidavits filed on behalf of the Defendants that they consider the post to be a very important one and, accordingly, it was submitted that, when the question of changing the head of the Department of German at University College Cork is being considered, the governing body cannot act capriciously, or unilaterally, but must observe fair procedures and, in particular, must give the holder of the office reasonable notice of the intention to consider the change and the reasons therefore. Clearly, this is an issue involving questions of law which, ultimately, will have to be resolved at the trial of this action. However, in my view, in the light of the Judgment of the Supreme Court in the well known case of Campus Oil and Others -v- the Minister for Industry and Energy and Others (1983 I.R.Page 88) it is not an issue which I must resolve when considering whether or not to grant the injunctive relief currently sought by the Plaintiff. In that regard, it appears to me that, insofar as that issue is concerned, when determining whether or not to grant the relief sought, I merely have to consider whether or not there is a fair question to be tried.
7. It is unnecessary for the purpose of this Application that I should review in detail or, indeed, at all the events which gave rise to these proceedings because those events are not relevant to any issue which I have to decide on the hearing of this Application. In that regard, it is sufficient to note that allegations of impropriety with regard to her conduct in the performance of her role as head of the Department of German at University College Cork have been made against the Plaintiff and, for her part, she complains about the manner in which the Defendants purported to investigate those allegations and, in particular she complains that the Defendants failed to vindicate her position as Professor of German and head of the Department of German at University College Cork and, as a result, she fears that the Defendants will remove her from the post of head of the Department. These allegations, complaints and fears all give rise to issues which will have to be determined at the trial of this action but, again, they are not issues which I have to determine for the purpose of this Application for the simple reason that the evidence before me is incomplete, in that, it is evidence on Affidavit which has not been tested by cross examination. Insofar as those issues are concerned; no less than with regard to the issue as to whether or not the Defendants must observe fair procedures when considering whether or not to terminate the Plaintiffs office as head of the Department of German, all I have to decide is whether or not there is a fair question to be determined at the trial of the action and, in that regard, as laid down by the Court in Campus Oil Limited -v- The Minister for Industry and Energy, hereinbefore referred to, I only have to be satisfied that there is a fair question to be determined; not that there is a probability that the Plaintiff will succeed on any particular issue.
8. In the light of the foregoing, I have no doubt at all but that, at the trial of this action, there are fair questions to be determined with regard; firstly, as to whether or not the Defendants are obliged to observe fair procedures when considering the determination of the Plaintiffs role as head of the Department of German at University College Cork and, secondly, whether or not the Plaintiff has legitimate complaints with regard to the investigation by the Defendants of the allegations of impropriety which have made against her and the alleged failure by the Defendants to vindicate her position as Professor of German and head of the Department of German. However, it does not necessarily follow that the Plaintiff is entitled to the injunctive relief currently being sought by her . In that regard, I take the point made by Counsel for the Defendant that, whatever (if any) relief is afforded to the Plaintiff at the trial of this action, it will not include the permanent injunction sought at sub paragraph (h) and the declaration sought at sub paragraph (j) in the prayer in the Plaintiffs Statement of Claim. However, I do not think that that fact , in itself, is a sufficient ground to refuse the injunctive relief currently being sought by the Plaintiff. While, as I have indicated, I do not think it possible that, at the trial of the action, the Plaintiff could be awarded the permanent injunction and the Declaration to which I have referred, I have little doubt but that the trial Judge would accede to an Application to amend the Statement of Claim by qualifying the claim for the permanent injunction by the addition of the words “except in accordance with law” and by qualifying the declaration sought by the addition of the words “unless and until lawfully terminated” and, in that event I think that it could well happen that the trial Judge could afford the Plaintiff relief in those terms. A much more compelling argument in favour of the proposition that I should refuse the injunctive relief currently sought by the Plaintiff is that, even in the event that she succeeds in her claim herein at the trial of this action, an award of damages would adequately compensate her for any wrong done to her and, in any event, the balance of convenience as between the parties would mitigate against the Defendants being prevented from appointing a new head to the Department of German at University College Cork in place of the Plaintiff; it being submitted that the current state of unrest in the Department of German arising from the criticism of the Plaintiffs conduct in the performance of her role as head of the Department necessitates consideration as to whether or not someone, other than the Plaintiff, should be appointed to the post. While it is a fact that, even were the Plaintiff removed from her position as head of the Department of German, she would continue to be a Professor of German and would not suffer any diminution in her income, there is no doubt in my mind but that, were that to happen, the publics perception would be that her role as head of the Department had been terminated because of misconduct of the kind that has been alleged against her and in that regard, Counsel on behalf of the Defendant conceded that the “dogs in the street” are aware of the allegations of impropriety and the criticisms which have been levied against the Plaintiff with regard to her conduct as head of the Department of German at University College Cork. Indeed, given that it appears that the only persons, apart from the Plaintiff, herself, who would be eligible for appointment to the position of head of the Department of German at University College Cork are among the persons who have been critical of the Plaintiff, there is no doubt in my mind but that, if one of those were to be appointed head of the Department in place of the Plaintiff, everyone would assume; not only that the Plaintiff had been removed from the position as head of the Department because of that criticism, but also that the criticism was justified. That being so, it seems to me that, if the Plaintiffs role as head of the Department of German at University College Cork is terminated in advance of the trial of this action and, at the hearing, it was determined by the trial Judge that that termination was unlawful, it would be extremely difficult; if not impossible, for the trial Judge to access a sum for damages which would adequately compensate the Plaintiff for the injury to her reputation because, while it may well be that, even if she is removed from the position as head of the Department, she would continue to be Professor of German at the College, for all that is now known it may well happen that, at some time in the future, she would be considered for a more prestigious post in another part of the world and fail to be appointed to that post because of her treatment at the hands of the Defendants. Essentially, therefore, it seems to me that, were the Plaintiff to be deprived of her post as head of the Department of German at University College Cork and it transpired that that depravation was unlawful, it is unlikely that any award of damages would adequately compensate her for the injury to her reputation.
9. Finally I must consider where the balance of convenience lies between granting or refusing the injunctive relief sought by the Plaintiff. In this regard, as I have already indicated, it is submitted on behalf of the Defendants that, as a result of the complaints and criticisms which have been levied against the Plaintiff, there is considerable unrest within the Department of German at University College Cork. Indeed, Counsel for the Defendants suggested that the Department was in crisis and that the only way to resolve the problem was to consider the appointment of a new head to the Department. In this regard, it seems to me that, whether or not there are significant problems within the Department of German at University College Cork and, if there are, who is to blame for them, is not a relevant consideration at the hearing of this Application. That is a problem for the trial Judge. However, given that the Defendants concede that the Plaintiff is entitled to remain as Professor of German at University College Cork and given that she has been the head of the Department of German at the University for the last 6 years, it seems to me that the appointment of a new head of the Department in advance of the hearing, while the question as to whether or not the Plaintiff is entitled to retain the post is still, as it were “up in the air” is likely to create greater difficulties within the Department. Moreover, I think that if a new head of the Department were appointed in advance of the hearing, it would place an intolerable burden on the trial Judge because, instead of having to decide the fairly straightforward question as to whether or not the Plaintiff was entitled to retain her role as head of the Department, he or she would then have to choose between two identified persons and, possibly, remove someone a post to which that had been appointed only a very short time previously. In those circumstances, it seems to me that the balance of convenience between granting or refusing the injunctive relief currently sought by the Plaintiff demands that the status quo be maintained and in that regard, I specifically, reject the submission by the Defendants that an injunction against the Defendants at this stage of the proceedings will cause them irreparable harm and/or amount to discrimination in favour of the Plaintiff. I cannot accept that maintaining a situation which has obtained for the last 6 years could have that effect.
10. In the foregoing circumstances I will grant the injunctions sought at sub paragraphs a, b, and c of the Plaintiffs Notice of Motion dated the 26th of May last and I will reserve the costs of this Application to the trial Judg