Cavenagh v William Evans Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Mummery,Lord Justice Tomlinson,Lady Justice Hallett |
| Judgment Date | 24 May 2012 |
| Neutral Citation | [2012] EWCA Civ 697 |
| Docket Number | Case No: B2/2011/1937 |
| Court | Court of Appeal (Civil Division) |
| Date | 24 May 2012 |
[2012] EWCA Civ 697
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE SOUTHAMPTON COUNTY COURT
HER HONOUR JUDGE LINDA SULLIVAN QC
Claim No: 0SB00359
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Mummery
Lady Justice Hallett
and
Lord Justice Tomlinson
Case No: B2/2011/1937
MR SHAEN CATHERWOOD (instructed by Wilsons Solicitors LLP) for the Appellant
MR STUART CAKEBREAD (instructed by Zaiwalla & Co) for the Respondent
Hearing date: 20 th April 2012
Introduction
This monetary claim was brought by the former managing director of a company, which terminated his appointment under an express term in his service agreement providing for summary termination with pay in lieu of notice. He sued the company for his pay in lieu.
The salient point is that, when the company exercised its contractual power, it did not know about the prior gross misconduct of its managing director. Had it known, it would have accepted his repudiatory breach of the service agreement and regarded itself as discharged from liability for pay in lieu. In those circumstances did the company have a defence to the claim for pay in lieu? The court below held that it did and dismissed the claim. This appeal by the managing director is against that order.
The appeal
The appellant is Mr Duncan Cavenagh. He was the managing director of the respondent, William Evans Limited (the Company). The Company decided that he was redundant. It summarily terminated his service agreement, which provided for six month's pay in lieu of notice. The Company agreed to pay him accordingly. It did not keep its promise to pay, as it was subsequently discovered that Mr Cavenagh was guilty of gross misconduct pre-termination.
The Company argued that Mr Cavenagh was not legally entitled to recover the agreed pay in lieu as a debt due to him and that, as the trial judge held, his prior gross misconduct gave the Company a complete defence to the debt claim. The Company relied on Boston Deep Sea Fishing and Ice Company v. Ansell (1888) 39 Ch D 339, a case in which a managing director counterclaimed for damages for wrongful dismissal and for arrears of salary in proceedings by the company for an account of secret commissions and for damages for breach of duty. The Court of Appeal held that the company could defend the claim by reliance on the managing director's prior gross misconduct as a good ground for dismissal, even though it was only discovered after commencement of the proceedings.
Boston Deep Sea Fishing is a leading authority for some of the basic principles governing dismissal of an employee for gross misconduct: (a) where an employee is guilty of gross misconduct, he may be dismissed summarily, even before the end of a fixed period of employment; (b) dismissal may be justified by reliance on facts not known to the employer at the time of the dismissal, but only discovered subsequently, even after the proceedings began; and (c) the dismissed employee is not entitled to any wages or salary for the broken period of employment immediately preceding his dismissal, because his entitlement had not accrued by then.
On this appeal the Company contended that the judge correctly held that it was entitled to rely on Mr Cavenagh's prior repudiatory breach as a defence. Against that Mr Cavenagh argued that Boston Deep Sea Fishing is distinguishable: in that case the employee's claim was for damages for wrongful dismissal: in this case Mr Cavenagh's claim is for a debt due under a term implemented by the Company and carrying with its exercise a stipulation to pay him 6 month's pay in lieu of notice.
Having accepted the Company's defence HHJ Linda Sullivan QC made an order dated 30 June 2011 dismissing Mr Cavenagh's £65,000 claim for pay in lieu, along with other claims for pension arrears and for pension contributions for 6 months.
The judge found that Mr Cavenagh caused an unauthorised withdrawal of £10,000 from the company's funds on 12 January 2010 for payment to his pension provider in the knowledge that he was not entitled to do so. The judge also found that the Company would have dismissed him summarily for that misconduct, had it known about it. Mr Cavenagh was refused permission to appeal against the judge's findings of fact.
On 23 September 2011 Dame Janet Smith granted a stay of execution and permission to appeal limited to ground 1, which raises the point whether the gross misconduct discovered by the Company after dismissal enabled it to avoid the liability to pay Mr Cavenagh the agreed sum in lieu. Mr Cavenagh also brought proceedings in the employment tribunal for unfair dismissal or a redundancy payment, but they have been stayed pending the outcome of this appeal.
More facts
The Company carries on the business of gun dealers and gunsmiths in St James's Street, London. It employed Mr Cavenagh as managing director from 1 February 2003 until 12 March 2010 when he was dismissed. The Company had been making losses since 2003. In early 2010 it settled on a different business structure without a managing director.
Under the terms of his service agreement dated 1 February 2003 Mr Cavenagh was appointed to serve the Company as managing director at an annual salary of £130,000. Clause 3.1 provided that, subject as thereinafter provided, the employment would continue "unless and until terminated by either party giving to the other not less than six months prior written notice."
Clause 11 ("Termination") provided that:—
"11.5 The Company may terminate the Appointment forthwith by paying salary and the value of all other contractual benefits in lieu of the required period of notice…and it is expressly agreed and declared that such payment in lieu of notice shall not constitute a repudiation of this Agreement."
There were other express powers in clause 11 entitling the Company to terminate the service agreement forthwith on grounds that included gross misconduct and wilful breach or non-performance of his duties under the agreement: see clause 11.1.2.
By letter dated 12 March 2010 the Company informed Mr Cavenagh that it had been decided that the role of managing director was no longer a viable position for the Company, would cease and that he would become redundant. The letter concluded:—
"In view of the above it is appropriate that your functions within the company will cease forthwith although of course you will receive all appropriate payments in lieu of any notice period to which you are entitled."
Although clause 11.5 was not mentioned as such in the dismissal letter, it is clear from its terms that the Company was purporting to exercise its contractual power of termination under that clause. A compromise agreement was drafted, though never executed. Sometime between the sending of that letter and the commencement of these proceedings in June 2010 the Company discovered that on 12 January 2010 Mr Cavenagh had wrongly procured a payment of £10,000 to be made by the Company to his pension provider.
Having uncovered Mr Cavenagh's prior misconduct the Company made no payments at all to him. In his proceedings issued on 15 June 2010 he claimed 6 months' salary in lieu and other sums. The Particulars of Claim did not expressly plead clause 11.5. The prayer claimed damages for breach of contract, but it is clear from paragraphs 8 and 9 of the Particulars that the claim was for payment of a debt: that is, the sum due under clause 11.5 by way of "six months salary and benefits in kind in lieu of notice" which neither at the time of, nor after, the letter of 12 March had the Company paid in lieu.
The Company's defence referred to Mr Cavenagh's implied duty to act in good faith towards the Company and not to act so as to damage the relationship of trust and confidence between himself and the Company. It alleged that, in breach of his duties, he had instructed an accounts clerk to make the payment of £10,000 out of the Company's account to the pension provider. That was alleged to be an act of gross misconduct, which the Company had not discovered until after its dismissal of Mr Cavenagh on 12 March. The defence pleaded that the breach of contract by Mr Cavenagh was a fundamental and serious breach "which entitled the Company to treat the contract as at an end on the basis of a repudiatory breach by [Mr Cavenagh]." The pleading continued that, notwithstanding the purported dismissal for redundancy on 12 March, the Company was entitled to rely on his prior repudiatory breach as having terminated the service agreement on 12 January 2010. As pointed out by Mr Catherwood on behalf of Mr Cavenagh, it was not pleaded by way of defence that the Company had itself repudiated the service agreement by failing to pay him in lieu.
The Company's counterclaim repeated the defence and claimed return of monies paid to him, or for his benefit, and due to the Company in quasi-contract, or because he had been unjustly enriched by acceptance and retention of the same. Wrongful procurement of the sum of £10,000 was alleged and return of that sum was claimed, along with an account of the monies paid to him by mistake on the basis that his contract of employment continued after the repudiatory breach on 12 January 2010.
I note that the counterclaim did not plead any breach of duty by Mr Cavenagh in not informing the Company of his gross misconduct either at the time he committed it or at any time before he was dismissed, nor did it claim any damages or other relief against him in respect of such...
To continue reading
Request your trial
-
Phones 4U Ltd ((in Administration)) v Ee Ltd
...for reasons other than those that subsequently emerge, a claim for post-termination loss cannot be sustained”. 111 I turn next to Cavenagh v William Evans Ltd [2012] EWCA Civ 697, [2013] 1 WLR 238. It was decided by the Court of Appeal after the first instance decision in Leofelis, but Rot......
-
Bristol Groundschool Ltd v Intelligent Data Capture Ltd and Others (Defendants/ Part 20 Claimants) Alexander John Whittingham (Defendant to Part 20 Claim)
...treated with some caution in its application to cases which are not cases between employer and employee. As noted by Mummery LJ in Cavenagh v William Evans Ltd [2012] EWCA Civ 697; [2013] 1 WLR 238 at [5]: "[5] Boston Deep Sea Fishing is a leading authority for some of the basic principles......
-
Mr D Torrance v PSSB Ltd: 4105741/2016
...Gastronom Ltd v Webb [1973] ICR 245; Williams v Leeds United Football Club [2015] EWCH 376; 10 Cavanagh v Williams Evans Ltd [2012] EWCA Civ 697 and W Devis & Sons Ltd v Atkins [1977] ICR The claimant provided comments on the authorities. Cook and Sutton were distinguished on the facts. Hot......
-
Hans Henning Reinhard v Ondra LLP and Others
...contractual consequences of its choice, after that election has been made. There is no release mechanism. Mr Callman relies on Cavenagh v Williams Evans Ltd [2012] IRLR 679 (" Cavenagh"), at [36] to [39]. In that case, the PILON provision was in materially the same terms as the present case......
-
Pilon Clauses: No Clawback For Misconduct
...v William Evans Ltd [2012] EWCA Civ 697 The Court of Appeal has held that an employee who had his employment terminated on the basis that he would receive a payment in lieu of notice remained entitled to the payment, even though his employer had later discovered his gross misconduct was suf......
-
Employer Could Not Rely On Subsequently Discovered Misconduct To Avoid Paying Contractual PILON
...Cavenagh v William Evans Ltd [2012] EWCA Civ 697 the Court of Appeal held that an employer is not entitled to withhold payment of a contractual payment in lieu of notice even though it later discovered that an employee had committed acts of gross misconduct prior to Mr Cavenagh was the Mana......
-
BONUSES (AND OTHER PAYMENTS) IN EMPLOYMENT
...para 21 below), thereby allowing the employer to raise a counterclaim to offset the employee's claim, see Cavenagh v William Evans Ltd[2012] EWCA Civ 697, although on the facts, this did not materialise as it was not pleaded as such. 42[2003] SGHC 145. 43Shepherd Andrew v BIL International ......
-
Contract Law
...Phosagro Asia Pte Ltd [2015] 5 SLR 1257 at [124]–[137]. 119 Piattchanine, Iouri v Phosagro Asia Pte Ltd [2015] 5 SLR 1257 at [142]. 120 [2013] 1 WLR 238 at 42. 121 [2010] EWHC 465 (Comm); Piattchanine, Iouri v Phosagro Asia Pte Ltd [2015] 5 SLR 1257 at [148]. 122 Piattchanine, Iouri v Phosa......