Bold v Brough, Nicholson & Ball Ltd
| Jurisdiction | England & Wales |
| Date | 1963 |
| Court | Queen's Bench Division |
Damages - Tax element - Earnings, loss of - Wrongfully dismissed - Award over £5,000 - Whether notional tax on first £5,000 to be deducted -
The plaintiff, who was born in 1908, entered the service of the defendant company in 1922. In 1929 he was appointed accountant and secretary of the company and in 1955 he became managing director. In 1958 the controlling interest in the defendant company was acquired by another company. By an agreement dated March 8, 1960, the defendant company agreed to employ the plaintiff as managing director for 10 years from March 31, 1959, at a salary of £4,000 a year, together with a yearly commission, subsequently agreed at £500 a year, and his employment was to continue after March 30, 1969, subject to six months' notice by either party of determination expiring on that date or any date thereafter.
In 1946 the plaintiff had joined the defendant company's staff pension and insurance scheme, a contributory scheme, the premiums for which were paid by both parties. The pension thus purchased became due on the plaintiff's 65th birthday. Rule 8 (e) of the scheme provided that membership should cease on a member being discharged from the service of the employer and rule 13 for the payment of an immediate pension in the case of early retirement if a member, with the consent of the employer retired five years before attaining the pensionable age. In 1959 the plaintiff became a member of the defendant company's discretionary pension and life assurance scheme. By clause 7 of the agreement of 1960 the defendant company undertook to pay all premiums payable during the period of the plaintiff's services under two policies of insurance and to refrain from doing anything that might decrease or determine the benefits to which the plaintiff was thereby entitled.
On July 27, 1962, the plaintiff was summarily dismissed by the defendant company. It was unlikely that he would be able to obtain other suitable work.
On his claim for damages for wrongful dismissal under the following heads: (A) £26,312 loss of salary and commission on the basis of the cost of annuities to provide £4,000 and £500 a year until March 30, 1969; (B) diminution in pension and (C) loss of life assurance cover under the staff pension and assurance scheme, it being agreed that should the plaintiff merely be entitled to a pension reflecting his own contributions up to March 30, 1969, its value was £729; (D) the amount of premiums payable under the discretionary pension and life assurance scheme, the agreed cost of an annuity to complete the policies being £5,219; and (E) interest:—
Held, (1) that the plaintiff was entitled to a sum based on the cost of annuities to provide his salary and commission until March 30, 1969, namely, £26,312, from which must be deducted £546 representing his actual earnings since dismissal, a sum for potential earnings, and some amount to allow for the possibility of a serious illness giving the defendants the right to terminate the agreement; that a further deduction of £800 must be made since, inasmuch as under section 38 of the Finance Act, 1960, tax was only exigible on an award of damages in excess of £5,000, the notional incidence of taxation on the lost earnings must be taken into account in relation to the first £5,000 of the award, which must be treated as though it was the total award (post, p. 209) and, on that basis, the £5,000 represented notional earnings of £5,850 (discounted on the basis of the cost of an annuity) over the six and two-thirds years on which, on the 1962 to 1963 tax tables the plaintiff would, over the period, have paid £800. Accordingly, the plaintiff was entitled to £21,000 for loss of salary and commission.
(2) That termination of the plaintiff's services by notice given by the defendants on March 30, 1969, would have been a discharge under rule 8 (e) of the staff pension and assurance scheme and not a leaving with their consent within rule 13, so that the plaintiff was entitled to £729 under heads (B) and (C).
(3) That the defendants had bound themselves to pay until March 30, 1969, all the premiums payable in respect of the discretionary pension and life assurance scheme and the clear intention of clause 7 of that scheme was that they should do nothing to decrease the benefits to which the plaintiff would thereby become entitled and, therefore, the plaintiff was entitled to £5,219 under head (D). Accordingly, the plaintiff was entitled to total damages of £26,948 with interest thereon at 5 per cent. from July 27, 1962.
ACTION.
The following statement of facts is substantially taken from the judgment. The plaintiff, Frederick Bold, who was born on February 9, 1908, was, at the time of the hearing, 55 years old. In July, 1922, at the age of 14, he entered the service of the defendant company, Brough, Nicholson & Hall Ltd., textile manufacturers, and remained in their employment until he was summarily dismissed on July 27, 1962, having thus served the defendants for 40 years. Before 1929, by working in his spare time, he had qualified as a certified accountant, and so became eligible for the post of accountant and secretary to the company, to which he was appointed in that year and which he filled for ten years until 1939. In 1955 he became managing director and retained that position until his dismissal on July 27, 1962.
In 1958 another company, Francis Sumner Holdings Ltd., acquired a controlling interest in the shares of the defendant company. As a result, in 1962, the board of the defendant company was reconstituted, the chairman of Francis Sumner Holdings Ltd. became chairman of the defendant company, and at least two other directors of that company took the place of former directors of the defendant company. The chairman and those two directors came to the conclusion that the plaintiff was not the man to carry out the reorganisation of the defendant company which they regarded as necessary and, by letters dated July 20, 1962, called on him to resign. The plaintiff declined to do so, and on July 27, 1962, received a further letter, dated July 25, 1962, informing him that he had ceased to be a director or managing director. It was agreed that his summary dismissal dated from July 27, 1962.
By an agreement under seal, signed on March 8, 1960, the defendant company had agreed to employ the plaintiff in his position of managing director for 10 years, commencing on March 31, 1959. By clause 6 of that agreement he was to be paid a fixed salary of £4,300 a year, payable by monthly instalments, and was also to receive yearly a sum equal to 3 per cent. of the consolidated profits of the company and its subsidiaries in excess of £50,000. Clause 12 (b) gave the company the right to terminate the agreement and the plaintiff's employment if the plaintiff became incapacitated from illness or any other cause from attending to his duties either permanently or for 183 days or any period of 52 consecutive weeks. Under the agreement the plaintiff's employment was to continue after March 30, 1969, unless either party served the other with six months' notice of determination expiring on that date or on any date thereafter.
The plaintiff had joined the company's staff pension and assurance scheme on its initiation in 1946. As the scheme was a contributory one, premiums were paid both by him and the defendant company and the scheme also provided a substantial life assurance cover. The pension thus purchased became due on the plaintiff's 65th birthday (February, 1973). The plaintiff had subsequently raised with the defendant company the question of what would happen to his pension in the event of his leaving their service during the period between March 30, 1969, when the service agreement might terminate, and his 65th birthday in February, 1973. A minute of the company recorded on May 8, 1959, stated that the board were not prepared to enter into an agreement to provide an additional pension, but should the plaintiff leave their service during the period in question for any reason other than misconduct or default or of his own accord, the company would make such payments as might be necessary to provide him with a pension on reaching the age of 65 of an amount equal to that which he would have received if he had retired upon reaching that age.
By rule 8 of the scheme
“Membership … shall terminate … (e) on a member being discharged from the service of the employer. A member who is absent from work through sickness or accident or … is temporarily absent for...
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