Parsons v B. N. M. Laboratories Ltd
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE SELLERS,LORD JUSTICE HARMAN,LORD JUSTICE PEARSON |
| Judgment Date | 04 April 1963 |
| Judgment citation (vLex) | [1963] EWCA Civ J0404-3 |
| Date | 04 April 1963 |
| Court | Court of Appeal |
[1963] EWCA Civ J0404-3
Lord Justice Sellers
Lord Justice Harman and
Lord Justice Pearson
In The Supreme Court of Judicature
Court of Appeal
(From: Master Jacob)
SIR ANDREW CLARK, Q.C. and Mr. J.F. KINGHAM (instructed by Messrs. Joynson-Hicks & Co"., Agents "for Messrs. Waltons, Luton, Beds.) appeared on behalf of the Appellants (Defendants).
Mr. ASHTON ROSKILL, Q.C., Mr. H.H. MONROE, Q.C. and Mr. ADRIAN HAMILTON (instructed by Messrs. "McKenna & Co,) appeared on behalf of the Respondent (Plaintiff).
The plaintiff in this action sought no more of the court than that it should assess the damages due to him from the defendants by reason of their wrongful termination of a simple agreement of service.
The plaintiff is an experienced and well qualified chemist and was employed by the defendants as their Chief Chemist and Technical Adviser under an agreement dated the 11th February, 1961, at a salary of £2,000 per annum plus a specified commission for a term of three years from the 15th March, 1961, and thereafter until determined by either party giving to the other three months notice in writing not to expire before the 15th March, 1964.
By letter of the 19th April, 1962, the defendants informed the plaintiff that they would employ him only until the end of July, 1962, after which date they would cease to pay any further salary. The plaintiff accepted that breach and repudiation of the agreement by the defendants and left their employment on the 31st May, 1962. He was paid full salary and commission up to that date and for the balance of his agreement up to the 15th March, 1964, he claimed damages.
A more simple and conventional common law issue it would be hard to find. There was no defence. The plaintiff signed interlocutory judgment against the defendants for damages to be assessed by a Master, and when the matter came before Master Jacob, with two experienced junior counsel to assist him with the evidence and issues, one might have assumed that the assessment would have been economically and expeditiously concluded to the satisfaction of both parties.
On the 27th August, 1962, the plaintiff had obtained another appointment in the Research Laboratory of Unilever Limited on a monthly basis at a salary of £1,600 per annum and the prospects were that the employment would continue for a long time but without any real likelihood of any increase of salary. In calculating the difference between the contractual salary and thenew salary, that is £400 for the balance of the period to the 151h March, 1964, about 18 months, the learned Master, be it noted, had regard to the gross earnings or, as I would prefer to say, the earnings in each case and made no deduction of tax although presumably some tax would arise on the £1,600 a year then being earned elsewhere by the plaintiff so as to reduce its net benefit to the plaintiff if that is the way it has to be regarded.
The judgment was for £1,100 loss of salary and £100 loss of commission, a modest total of £1,200, but the defendants gave notice of appeal alleging that the damages should only have been £820. 17s. 6d.
Both sides have appeared before us with leading counsel, the respondent, the plaintiff, employing a second leader with particular experience in our Revenue law. The major trouble has arisen over income tax. The appellants have submitted that £320 in respect of tax should be deducted from the sum assessed for loss of salary and commission. The minor dispute, scarcely less strenuously fought on both sides, concerns a sum of £59. 2s. 6d. which the plaintiff received as unemployment benefit during a period when he was registered at the Labour exchange, before acquiring the new employment, for which the appellants claim a further credit.
It seems to have been readily accepted that the case of British Transport Commission v. Gourley (1956 Appeal Cases page 165) was a decision to be applied to the assessment of damages in a case such as this unless some provisions of the finance Act, 196C, have a contrary effect. faster Jacob said so in terms and the submissions before us progressed on that basis although I ventured to question it in the course of the argument.
In Phipps v. Orthodox Unit Trusts (1958 1 Queen's Bench page 314) not insignificantly an interlocutory appeal on particulars in relation to tax liability in a case of wrongful dismissal, Lord Justice Jenkins (as he then was) said: "Since that decision" (that is British Transport Commission v. Gourley) "it has been established that where a claim is made for damages, whether forpersonal injuries or for wrongful dismissal, the income tax and surtax liability of the plaintiff is an essential element of the calculation of damages". It is with all deference to that and my brethren's views that I would question whether the Gourley decision is so far-reaching and in particular whether it is binding in a case of wrongful dismissal. The real question is whether the opinion of Lord Goddard, with the undoubted weight of his authority and with some general approval of some of the other noble Lords, is more than an obiter dictum.
In West Suffolk County Council v. . Rought Limited (1957 Appeal Cases page 403) the decision in Gourley was applied and Lord Morton put the decision of the House in these terms at page 413: "It seems to me that the reasoning which led this House to its decision in Gourley's case is equally applicable to the present case. In Gourley's case the House had to decide what was the actual monetary loss suffered by the injured man by being deprived of earnings which he would have made if he had not been injured. In the present esse the House has to decide under" heading 3 (B) what was the actual monetary loss suffered by the respondents by being deprived of profits which they would have made in the period of nine months already mentioned. I can see no reason why, if the incidence of taxation was a relevant factor in Gourley's case, it is not also a relevant factor in the present case". Iveither Gourley nor Rought was a case of damages for breach of contract and I do not think the decision in Rought in itself interprets Gourley as applying to such a case as the present.
The width of the argument for the appellants called in question, to my mind, the very basis on which the decision in Gourley rests, but the present question is only whether Gourley applies to a case of wrongful dismissal. Under the Finance Act, 1960, provision is made for the taxation of sums acquired by an employee in the circumstances specified, which would include damages for breach of a service agreement, in excess of £5,000. The argument was, as I understand it, that where such a sum fellto "be assessed the court in order to apply the dominant rule of law expressed in Gourley must, after assessing the amount properly due, add on the tax which the plaintiff would have to pay on that sum and award the gross sum so that the plaintiff would in the result, after payment of the tax, receive the appropriate or correct compensation.
I am tempted to ask what has gone wrong with the common law that it can seriously be submitted as a necessary corollary to one of its principles that a defendant can be called upon to pay the tax imposed upon damages received by a plaintiff. If this argument had been adumbrated or foreseen in Gourley it might well have influenced those noble Lords who had previously held otherwise to have adhered to their original views. The mere statement of the argument seems to me to reveal how extraneous and remote taxation may be in the assessment of damages. At no period in the history of our law can I contemplate a judge directing himself or a jury to impose on a defendant the tax, or the best estimate that can be made of it, which a plaintiff would have to pay on an award of damages. The finance Act, 1960, in making the special provisions here relevant in regard to tax cannot have had any such possibility in contemplation.
Gourley and Billingham v. Hughes (1949 1 King's Bench page 643) were actions in tort where the earnings of professional men which had been lost or diminished by reason of the defendants' negligence had to be assessed. Gourley changed the law and established in such a case that in calculating the damages the incidence of tax should be taken into account. It was a new application of the old principle of law that the wrongdoer should make good to a plaintiff the financial loss which he has suffered or will probably suffer as a result of the defendant's wrongdoing.
That is not this case, which concerns two parties to a contract. Close as the analogy may be between the loss of earnings, either from a contract of service or otherwise, by reason of the negligence of a third party and the loss of earnings due to breach by a party to the contract which brought about the loss, I am notsatisfied that the same considerations apply. A third party is not bound by the letter of a contractual bond and the approach to the assessment of damages against a third party permits of a more general and broader view as established by Gourley.
arl Jowitt said in Gourlay at page 199: "There may well be a difference between'actions for personal injuries and actions for wrongful dismissal in regard to the obligation of the plaintiff to pay tax on the amount of damages received, and cases on the one topic may therefore be a dangerous guide to follow on the other. Mr. Justice du Parcq, in the course of his judgment, saids 'I should be reluctant to give a decision which would seek to alter an inveterate practice unless I were convinced that the practice is inconsistent with principle, and unjust, end I am not so convinced in this case. On the contrary, I am of opinion that it is right in principle, to have no regard, in assessing damage?...
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