John Morrish V. Ntl Group
| Jurisdiction | Scotland |
| Judge | Lord Nimmo Smith,Lord MacLean,Lord Philip |
| Judgment Date | 03 July 2007 |
| Neutral Citation | [2007] CSIH 56 |
| Court | Court of Session |
| Date | 03 July 2007 |
| Published date | 03 July 2007 |
| Docket Number | XA143/06 |
| EXTRA DIVISION, INNER HOUSE, COURT OF SESSION | |
| Lord Nimmo Smith Lord Philip Lord MacLean | [2007] CSIH 56 XA143/06 OPINION OF THE COURT delivered by LORD NIMMO SMITH in APPEAL from the Sheriffdom of Glasgow & Strathkelvin at Glasgow in the cause JOHN MORRISH Pursuer and Respondent: against NTL GROUP LIMITED Defenders and Appellants; _______ |
Act: S. Reid, Solicitor Advocate; Maclay Murray & Spens
Alt: Fairley; Brodies LLP
3 July 2007
Introduction
[1] This is an action of damages for breach of a contract of employment between the pursuer and respondent ("the employee") and the defenders and appellants ("the employers"). The employee is the former financial director and company secretary of the employers. His conditions of employment were regulated by an agreement dated 6 July 1984 ("the agreement") entered into between him and Clyde Cablevision Limited. By operation of the Transfer of Undertakings (Protection of Employment) Regulations 1981 the rights and obligations of Clyde Cablevision Limited were transferred to the employers.
[2] Clause 1 of the agreement was in the following terms:
"1. The Company shall employ the Appointee and the Appointee shall serve the Company as Financial Director and Company Secretary of the Company and subject to the provisions for determination of this Agreement hereinafter contained such employment shall be for a period of three years commencing on First June, Nineteen hundred and eighty four (notwithstanding the date hereof) and thereafter shall continue unless and until terminated by either party giving to the other not less than twelve months written notice thereof expiring on or at any time after Thirty first May, Nineteen hundred and eighty seven."
[3] By letter dated 6 January 2005 the employers informed the employee that his employment was terminated with effect from 29 December 2004 "as a result of your position being made redundant". The employee avers that by thus terminating his employment without giving twelve months written notice thereof as provided by Clause 1 of the agreement, the employers were in breach of contract. If this is so, then the employee is entitled to an award of damages in accordance with well-established principles. The leading authority is Hadley v Baxendale (1854) 9 Ex. 341, in which Alderson B said, at p.355:
"Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered either arising naturally i.e. according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it."
Among many subsequent cases, reference may be made to Victoria Laundry (Windsor) Ltd v Newman Industries Ltd [1949] 2 K.B. 528. The employee has raised a commercial action in Glasgow Sheriff Court in which he claims, in accordance with these principles, damages under various heads. It is sufficient for present purposes to refer to these heads simply as they appear in the pleadings: "Diminution in Value of Pension Rights", "Value of Pension Rights", "Loss of Opportunity to receive 2004 Executive Bonus Payment", "2004 Executive Bonus Scheme", "Loss of Opportunity to receive LTIP [Long Term Incentive Plan] Payment", "Loss of Opportunity to exercise Share Options" and "Breach of Promise to pay one-off Bonus of £50,000".
[4] The response of the employers is that they were not in breach of contract because the contract of employment between the parties was subject to an implied term giving right to the employers lawfully to terminate the contract by making payment to the employee of a proportion of his salary and emoluments corresponding to the period of notice stipulated in the contract. Consistently with this approach, it appears from the letter dated 6 January 2005 that the employers have throughout been willing to make a payment in lieu of notice ("PILON") to the employee, together with additional payments "as compensation for loss of contractual benefits". The question for determination is whether they are contractually entitled to adopt this position.
[5] By agreement between the parties, the sheriff heard a debate upon the issue whether the agreement was subject to the implied term contended for by the employers. Secondary issues in relation to quantification of the damages claimed were left over for subsequent resolution. By interlocutor dated 27 February 2006 the sheriff found that the agreement was not subject to the implied term contended for by the employers. As appears from the relative note, the sheriff held that as a matter of general law there is implied into employment contracts an entitlement in favour of the employers to dismiss without notice on paying wages and other contractual entitlements in lieu, but the express provisions of Clause 1 of the agreement were effective to oust this entitlement in the present case. The employers appealed to the sheriff principal, who by interlocutor dated 14 June 2006 refused the appeal. He held:
"In my opinion the words used by the parties in their contract are clear. They are more than sufficient to oust the term implied ex lege. The express term has supremacy over the implied term."
He also said:
"In the instant case the implied term was not necessary to give the contract efficacy but rather it is said to be implied as a matter of law. I accept that because the term is implied as a matter of law very clear words are required in the contract to exclude the implied term. In the present case I consider that a similar clash occurs between the express term and the implied term contended for."
The employers have now appealed to this court.
The appeal to this court
[6] Before us, parties were agreed that, in general, the Scottish courts will not grant the remedies of interdict or specific implement with a view to enforcement of a contract of employment. No such remedy is sought in the present case. Accordingly any remedy available to an employee whose contract of employment has been terminated by his employers is a pecuniary one. The issue between the parties is whether, if the employers have terminated the contract without giving the period of notice provided for by the contract, that constitutes a breach of contract, entitling the employee to payment of damages in accordance with the normal principles referred to above, or whether it constitutes the exercise by the employers of their contractual right under the implied term contended for by the employers. We intend, so far as possible, to address this issue only so far as is necessary to determine the respective rights of the parties under this particular contract of employment.
[7] Counsel for the employers submitted that there was an implied term which applied specifically to every contract of employment, under which satisfaction might be given by payment in lieu of wages. The...
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