High Court of Ireland Decisions

Neutral Citation No: [1989] IEHC 33

1987 No. 1180 Sp.

1181 Sp.

1182 Sp.

1183 Sp.

ROYAL TRUST COMPANY OF CANADA (IRELAND) LIMITED AND THE TRUSTEE SAVINGS BANK DUBLIN

PLAINTIFFS

.V. KELLY AND OTHERS

DEFENDANTS

Judgment of Mr. Justice Barron delivered the 27th day of February 1989.

The first-named Plaintiff is a subsidiary of a Canadian company and carried on a banking business in the State until the year 1983. In that year the parent company decided to cease its business here. In pursuance of this decision, efforts were made to sell that business as a going concern. Although the Bank had been trading profitably, it proved impossible to find a buyer. It was then decided to close the operation. This in turn meant making each of its employees redundant.

These decisions were not taken by the Board nor implemented by it. Instead the Vice President for Europe, Robert Traquair, and a senior associate director in London, John Newman were responsible for carrying out this policy. When it became obvious that the Bank could not be sold as a going concern and it became necessary to close the operation, a memorandum dated 23rd May 1983 was posted on the Bank notice board. So far as is relevant it was as follows:

"In the event of the Bank's business being discontinued.

4. Personal loans will continue at present levels of interest charged until the planned expiry date. 5. Mortgages will be maintained at 4% rate for two (2) years from date of separation and then will be charged at prevailing Building Society rates. If, however, an ex-employee receiving this benefit secures employment in a firm/institution which provides beneficial mortgage financing, the mortgage loans will become immediately repayable to Royal Trust.

7. The present pension fund, less such refunds to employees of own contributions as are requested by them, will be utilized in full to purchase annuities for present employees related to individual length of service with Royal Trust. Alternatively the benefit earned to date by any member of the staff will, on request, be transferred to a recognized pension scheme within the State."

The remaining provisions of the notice are immaterial to the present proceedings. This notice was followed by a letter of dismissal to all employees dated the 15th June 1983 in the following terms:

"We regret to advise you that we shall be terminating your employment by reason of redundancy with effect from 15th July 1983. We enclose form RPI givipg the formal notice under the Redundancy Payments Act 1967 to 1979. (The amount of the payments to be made was then set out).

Your personal loan will continue on the existing terms until the planned expiry date unless you wish to repay all or part of the outstanding balance from the monies due to you.

Your mortgage loan will be maintained at the rate of 4% p.a. for two years from the 15th July 1983 and then will be charged at prevailing Building Society rates. If, however, you secure employment in a firm/institution which provides beneficial mortgage financing, the mortgage will become immediately repayable.

As a member of the pension fund you may take a refund of your contributions or take a deferred annuity or transfer your benifits to another recognized pension scheme. (Any surplus arising will be used to augment deferred benefits or transfer values). Will you please advise me what option you wish to take". .

There was no previous discussion of the terms contained in these documents either with the Board or the staff members concerned. There were twenty-one members of staff affected.

Of these fifteen were union members on whose behalf negotiations subsequently took part between two staff union members and the two company directors concerned. Although all the Defendants were not members of the union, it is common case that whatever terms were negotiated on behalf of the union members would have applied to them also. These negotiations commenced on the 16th of June 1983 and continued until the 7th of July 1983.On the 8th of July 1983 each member of staff received a letter as follows:

"Dear,

We refer to our letter dated 15th June 1983 and subsequent discussions. We write to confirm that the additional redundancy payment payable to you on 15th July 1983 will be (This sum is based on six weeks' pay for each year of service or nine months' pay plus one week's pay for each year of service whichever is the greater).

On 15 July 1983, you will receive a cheque to cover the following: salary to date, salary for any balance of notice due, holiday pay - less allowances for holidays taken, statutory minimum redundancy payment, and additional redundancy payment. Deductions will be made for any balance outstanding on the holiday fund and stock option loans and P.A.Y.E. deductions.

If you wish to renew your V.H.I. cover, please advise us, as soon as possible, giving Royal Trust authority to deduct the premium from your final salary payment. If you have a personal loan and mortgage outstanding, you may opt to add the personal loan to your mortgage loan, otherwise the personal loan will continue on existing terms. Please advise us if you wish to take up this option.Further discussions are taking place with the Retirement Benefits District of the Revenue with regard to pension benefits and we shall write to you as soon as possible, with details of the options available.

We shall be writing separately in due course to those staff with personal loans and mortgage loans.

We have arranged for a tax manager from Stokes Kennedy Crowley & Co., to be available for consultations in the office on Monday and Tuesday 11 and 12 July. If you wish to take up this opportunity, please contact me or my secretary."

On the 15th July 1983 each staff member received the following:

"The following documents are attached to this letter:

(1) Cheque in your favour for £ ;

(2) Schedule showing how that figure is calculated. The following documents are also enclosed:

P45 and copy of RP2.

This letter and its enclosures constitute an offer by the Bank to settle for the sum of £ all outstanding claims that you may have against the Bank (as distinct from any claim the Bank may have against you, on foot of loans or otherwise) relating to or arising in any way from your employment with the Bank and/or the termination of that employment. This offer is irrevocable for a period of one week from its date and may be accepted by you during that period simply by lodging, cashing or otherwise negotiating the enclose cheque. If you disagree with the calculations set out in the attached schedule and with the amount of the enclosed cheque you should immediately get in touch with Mr. Gerald B. Sheedy the Bank's Managing Director at the above address, and you should not negotiate the enclosed cheque. If you do so, you will have accepted the offer of above referred to."

Several members of staff had personal loans from the Bank and also had mortgage loans. These latter loans were at a preferential rate and as can be seen these members were being offered a continuation of this preferential rate of interest for a period of two years after which the Building Society rate was to apply.

Each of the staff accepted the cheque sent to them on the 15th July 1983. On 5th August 1983 they were sent Standing Orders for the interest payable under the loans.

These were necessary since there were no salaries from which the appropriate interest could be deducted. These Standing Orders were for payment calculated at a rate of 4% on the mortgage loan and contained nothing to indicate that the rate would subsequently be increased. The Bank subsequently sold its loan portfolio to the second-named Plaintiffs who on the 19th December 1983 wrote to each of the persons concerned that it had taken over the relevant mortgage from the first-named Plaintiff and in the second paragraph stated:

"I wish to state clearly that the terms and conditions of your loan, originally agreed with Royal Trust Bank (Ireland) Limited, will not change in any manner under the new administration by Trustee Savings Bank Dublin."

There is a dispute as to what occurred in the course of the negotiations between the 16th of June 1983 and the 7th July 1983. Robert Traquair said in evidence that he was satisfied that agreement had been reached on all the terms upon which the staff contracts were being terminated. He said that if he had not been so satisfied he would not have terminated the negotiations. David O'Brien, one of the union staff members who took part in those negotiations gave evidence at variance with this. He said that the purpose of the negotiations was to see what further terms could be obtained from the Bank. The staff attitude was that the terms were being imposed unilaterally and that they were not there to agree but to see what variations could be obtained. Both witnesses accepted that discussions took place concerning the continuance of the mortgage loans at the preferential rate of interest and that the company was not prepared to grant any further concession. .At these meetings, it was agreed that the amount of the redundancy payments should be increased. Apparently also, although David O'Brien, has no recollection of it, it was agreed that the staff should have the option to add their personal loans to their mortgage loan accounts. Further discussion took place in relation to their pension fund entitlements, but no agreement was reached on this matter. In relation to the pension fund, an actuary was brought from London to offer a comprehensive package as to how the fund should be applied. The staff refused to accept this package. Subsequently, after the redundancy payments had been accepted, further discussions took place at which proposals made by the staff substantially different from those previously offered were ultimately agreed.

I accept that so far as Mr. O'Brien was concerned the negotiations took place to see whether or not better terms could be obtained for the staff than those already offered, but that so far as Mr. Traquair was concerned he was seeking to obtain agreement to an overall package. I prefer the evidence of Mr. O'Brien to that of Mr. Traquair as to how matters stood when the negotiations concluded. I accept that each party was satisfied that the other has gone as far as it would, but that no firm agreement was reached. Each was aware what was acceptable to the other.

The Plaintiffs submit that the closure of the business was upon terms agreed between the company and its staff and that by accepting the redundancy payments made to them, the staff accepted that package. One of its terms was that the preferential rate would continue only for two years and that by their failure to pay the increased rate each of the Defendants has become liable to repay the capital together with interest at such increased rate.

The Defendants' case is that there was no such agreement. They submit that accordingly the mortgage loans continued on their original terms. These contain a provision that the loan should determine on cesser of employment. They submit however that there is an implied term that such termination does not occur by reason of the voluntary act of the Bank in closing its operation. Finally, they submit that even if the mortgage loan has been called in, the capital sum is repayable at 4% until actual payment so that the Plaintiffs cannot obtain any higher interest.

There is no doubt that the terms as originally offered by the company were on a take it or leave it basis. Negotiations then took place to see whether or not these terms could be altered to the benefit of the staff members. Although none of the staff was satisfied with the terms offered, I accept that they were all resigned to having to take the redundancy payments offered upon the Banks terms. There was no overall agreement, but I feel sure that each staff member was resigned to accepting his or her redundancy payment on the terms being insisted upon by the Bank if that was the basis upon which such payments were being offered. Mr. Phelan conducted his own negotiations and I accept that they terminated on no different basis from that upon which the union negotiations terminated.

It is accordingly necessary to determine the terms upon which the redundancy payments were made. It would have been expected that the Bank would have set out the terms of the package and have made acceptance of the redundancy moneys the acceptance of the terms of that package. Admittedly, it was clear that a serious difference of opinion existed in relation to the application of the pension fund and that therefore no firm agreement could be reached on this term. However, this need not have been a bar to an overall concluded agreement. The package could have set out the terms being offered by the London actuary with a proviso "or such other application as the Bank may subsequently agree."

The letter accompanying the redundancy cheques made no effort to make their acceptance an acceptance of the package. Nor does it purport to be written in pursuance of an existing verbal agreement. It is clearly as stated an offer in relation to part of the legal relationship between the parties and sets out equally clearly that acceptance of the enclosed cheque was an acceptance of that offer only. The letter does not purport to deal with the pension fund and expressly excludes loans from the ambit of its offer. As a result, the acceptance of the cheques did not operate as an acceptance of any offer to allow the preferential rate payable under the mortgage to continue for a period of two years. I am quite sure that the Defendants believed that they would get the benefit of this rate for such further period. This is clear from the letters written by Nuala Kelly. But it is significant that she did not know what the position would be when the two year period expired. The mortgage was an endowment mortgage under which interest alone was payable. Yet when she wrote to the Plaintiffs by letter dated the 19th of January 1984, she asked whether the mortgage would continue on an interest only basis after the expiry of the two year period. Clearly no firm agreement had been reached between the parties on this item. Their understanding remained based upon the unilateral statements of the Plaintiffs but never contained in any formal offer therefore never accepted.

It was unfortunate that the Standing order sent to each of the Defendants should have calculated interest at 4% only. This led them to believe that their mortgages would continue on their existing terms as to interest and repayment. This was compounded by the letter dated 19th December 1983 from the second-named Plaintiffs which could only have confirmed this belief. Nevertheless, there is no evidence from which these letters could support an estoppel, nor is reliance placed upon estoppel.

The Defendants say that the mortgages contained an implied term that the Plaintiffs could not voluntarily close their business and determine the employment of the Defendants as a result. Each of the mortgages is in similar terms. The rate of interest charged is 4% being the "Banks' staff mortgage lending rate." Each contains a proviso in the following terms or to like effect:

"That in case at any time any of the said instalments or payments or other monies payable by the borrower to the Bank shall be in arrear and unpaid for twenty-eight days after the same shall have become due or if the said shall cease to be employed by the Bank then and in such case the principal sum then outstanding shall immediately on the expiration of twenty-eight days become due and payable by the borrower in addition to any payments and monies in arrears and shall be recoverable by the Bank with interest at the rate specified in the second schedule hereto on all balances from time to time outstanding up to the date of payment by action against the borrower or by an exercise or enforcement of any of the powers and remedies of the Bank in that behalf and if there is any interest or monies in arrears as aforesaid the same shall after the said period of twenty-eight days be treated as an accretion to principal and bear interest accordingly."

The rate referred to in the second schedule was the staff lending rate. Counsel for the Defendants submits that the contract of loan contains an implied term that the first-named Plaintiff would not do anything to make it inoperable. He referred to Stirling v. Maitland (1864) 5 Best and Smith 840. In that case, the Plaintiff had been appointed an agent upon terms inter alia that if the agency was terminated he would be paid a specified sum of money. The principal went out of business and claimed that it no longer had any liability to the Plaintiff.

The Plaintiff sued for the agreed sum and succeeded. The Court read the covenant not as one which prevented the principal from dismissing the agent, but as one which obliged them to pay a particular sum of money to the Plaintiff if they did. A further expression of the same principle is contained in the following passage from the Judgment of Lord Blackburn in Mackay v. Dick and Stevenson (1881) 6 App Cas 251 at page 263 cited in Sprague v. Booth 1909 AC 576 which is as follows:

"where in a written contract it appears that both parties have agreed that something shall be done, which cannot effectually be done unless both concur in doing it, the construction of the contract is that each agrees to do all that is necessary to be done on his part for the carrying out of that thing."

In William Cory and Son Limited v. London Corporation 1951, 2 K.B. 476 at page 484 in a passage approved by Keane J. in Massarella v. Massarella, an unreported Judgment delivered on the 18th July 1980 Lord Asquith dealing with the same principle says:

"In general, no doubt, it is true that a term is necessarily implied in any contract whose other terms do not repel the implication, that neither party should prevent the other from performing it, and that a party so preventing the other is guilty of a breach."

Examples of the application of the principle are to be seen in Ogdens v. Nelson 1905 AC 109, where as in Stirling .v. Maitland a company which had covenanted to pay the Plaintiff annual sums was held not to be able to escape its liability by voluntarily closing down its business.

In Southern Foundries v. Shirlaw 1940 2 All E.R. 445 and in Schindler v. Northern Raincoat Company Limited 1960 2 All E.R. 239 it was held that a managing director could not be removed by the company in pursuance of the provisions of its articles when he had a service contract the term of which had not yet expired. Similarly in Brewer Street Investments v. Barclays Woollen Company Limited 1953 2 All E.R. 1330 a prospective tenant for whom a landlord had carried out alterations on the premises was not permitted to break off negotiations for the lease solely to escape liability for the cost of such alterations.

These cases establish that a party to a contract cannot voluntarily create conditions which will prevent the performance of the contract. So where A contracts with B to catalogue his library, he cannot sell his books before B comences work. Where A agrees to assign a leasehold interest to B and to obtain the necessary consent of the lessor, he cannot refuse to seek such consent. The rule is analogous to the rule in property law that a grantor cannot derogate from his own grant.

In my view, the present case is substantially different. There was no term in the contract of employment of any of the Defendants which precluded the first-named Plaintiff from terminating such contract. If this had been done without reason, other statutory rights such as those contained in the Unfair Dismissals Act would have accrued to the Defendants. Nevertheless their employment would have ceased. The principle for which the Defendants contend does not entitle an employee to say, my employment cannot be terminated other than for good cause and certainly not because the employer decides to cease business. If it did, much of the statutory provisions protecting employees would have been unnecessary. It is an implied term of every contract of employment other than for a fixed period that it can be terminated upon reasonable notice. A similar implied term is contained in Contracts of Agency: see Ward v. Spivack 1957 I.R. 40. In that case, the trial judge held that there was an implied term in a contract of agency that an agent after the termination of his agency remained entitled to commission on all future orders received by his principal from customers introduced by him. The Supreme Court reversed this decision upon the ground that to imply such a term was to make a new contract for the parties.

In my view, therefore, the provisoes contained in the mortgage deeds took effect and the principal sums became due and payable as from the dates upon which the respective employments terminated. In these circumstances, the Defendants submit that nevertheless they are liable to pay only the preferred rate of interest until payment or recovery of the principal sum. That is what the documents say, however unlikely it may be that that is what the parties intended the deed should provide.

There will be a declaration that the mortgages determined at the expiry of the contracts of employment of each of the Defendants and that the principal sums still owing stand well charged on the relevant property together with interest at the rate of 4% thereon from the date of such termination until the date of repayment.