ON APPEAL FROM THE SOUTHAMPTON COUNTY COURT
HER HONOUR JUDGE LINDA SULLIVAN QC
Claim No: 0SB00359
Strand, London, WC2A 2LL |
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B e f o r e :
LADY JUSTICE HALLETT
and
LORD JUSTICE TOMLINSON
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DUNCAN CAVENAGH |
Appellant |
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- and - |
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WILLIAM EVANS LIMITED |
Respondent |
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MR STUART CAKEBREAD (instructed by Zaiwalla & Co) for the Respondent
Hearing date: 20th April 2012
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Crown Copyright ©
Lord Justice Mummery:
Introduction
The appeal
More facts
"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."
"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."
The judgment
"Mr Catherwood [counsel for Mr Cavenagh] further submits that this is an action in debt and that that in some way alters the principles evinced in Boston. I reject that submission because it places far too great an emphasis on the formal nature of the pleadings and does not concentrate on the essential issues in the case. This case is about the contractual relationship between the Complainant and the Defendant."
Appellant's submissions
"(2) The contract of employment provides expressly that the employment may be terminated by notice, or on payment of a sum in lieu of notice, summarily. In such a case if the employer summarily dismisses the employee he is not in breach of contract provided he makes the payment in lieu. But the payment in lieu is not a payment of wages in the ordinary sense since it is not a payment for work to be done under the contract of employment."
Discussion and conclusions
"It must be borne in mind that all that is required for acceptance of a repudiation at common law is for the injured party to communicate clearly and unequivocally his intention to treat the contract as discharged: see Vitol SA v. Norelf Ltd …per Lord Steyn. If the contract and the general law provide the injured party with alternative rights which have different legal consequences, as was held to be the case in Dalkia Utilities V. Celtech, he will necessarily have to elect between them and the precise terms in which he informs the other party of his decision will be significant, but where the contract provides a right to terminate which corresponds to a right under the general law (because the breach goes to the root of the contract or the parties have agreed that it should be treated as doing so) no election is necessary. In such cases it is sufficient for the injured party simply to make it clear that he is treating the contract as discharged… If he gives a bad reason for doing so, his action is nonetheless effective if the circumstances support it. That, as I understand it, is what Rix LJ was saying in paragraph 32 of his judgment in Stocznia Gdanska SA v Latvian Shipping Co with which I respectfully agree."
Result
(1) By virtue of the letter of 12 March 2010 Mr Cavenagh acquired an accrued right under the service agreement to six month's pay in lieu. That debt was created by the Company's exercise of the contractual power to terminate his contract under paragraph 11.5.
(2) There was no provision in the service agreement denying him that right, if the Company subsequently discovered that he had committed a prior act of gross misconduct.
(3) There was no general principle of contract law barring or extinguishing his right to recover the pay in lieu as a debt from the Company. The principles laid down in Boston Deep Sea Fishing did not provide the Company with a defence to the claim for pay in lieu nor did the general principles governing the termination of a service agreement by acceptance of an employee's repudiatory breach.
(4) No point arose on Mr Cavenagh's liability to the Company on its counterclaim. It was limited to recovery of the sum of £10,000. He accepted liability and had agreed to repay it. There was no counterclaim against him for any other breach of contract or breach of duty.
Lord Justice Tomlinson :
". . . Where one party has done something which the law regards as a wrongful repudiation of the contract and the other party has thereupon determined the contract, whether under an express power contained in the contract or in the exercise of his right to do so under the common law, he is entitled to damages for non-performance of the contract during the period that it has still to run; but . . . if that party has not done something which the law regards as a wrongful repudiation of the contract, the other party, although he may be entitled under an express power to determine the contract, is not entitled to damages for non-performance of the contract during the period for which it would have continued to run but for such determination."
Lady Justice Hallett: