Addis v. Gramophone Co., Ltd [1909] UKHL 564
On Appeal from the Court of Appeal in England.)
Monday , July 26 , 1909 .(Before the Lord Chancellor (Loreburn) , Lords James of Hereford, Atkinson , Collins , Gorell , and Shaw .)47 SLR 564Addis v. Gramophone Company, Limited.Subject_ Contract — Breach — Measure of Damages — Exemplary Damages — Wrongful Dismissal of Servant. Facts:In an action by a manager of a company against his employers for breach of contract by wrongful dismissal, held ( diss . Lord Collins) that it was incompetent to include in the damages awarded in that action a sum in respect of the manner of the dismissal and the injury to the plaintiff's feelings.Per Lord Atkinson — An aggrieved party to a contract “is to be paid adequate compensation in money for the loss of that which he would have received had his contract been kept, and nothing more.”Per Lord Shaw — “Suppose that slander or libel accompanied the dismissal, nothing, as I understand, is here decided to the effect that the slander or libel, which is cognisable by law as a good and separate ground of action, suffers either merger or extinction by reason of proceedings in respect of the breach of contract which such slander or libel accompanied.”The appellant had been in the respondents' employment as their company manager. He had been wrongfully dismissed in breach of his contract of service. In an action of damages at his instance the jury awarded an amount admittedly in excess of his direct financial loss. The verdict for the whole amount was set aside by the Court of Appeal ( Cozens-Hardy , M.R., Buckley and Moulton , L.JJ.).Their Lordships gave considered judgment as follows:—
Lord Chancellor (Loreburn) — The plaintiff was employed by the defendants as manager of their business at Calcutta at £15 per week as salary and a commission on the trade done. He could be dismissed by six months' notice. In October 1905 the defendants gave him six months' notice, but at the same time they appointed Mr Gilpin to act as his successor, and took steps to prevent the plaintiff from acting any longer as manager. In December 1905 the plaintiff came back to England. The plaintiff brought this action in 1906 claiming an account and damages for breach of contract. That there was a breach of contract is quite clear. If what happened in October 1905 did not amount to a wrongful dismissal, it was, at all events, a breach of the plaintiff's right to act as manager during the six months and to earn the best commission he could make. When the action came to trial it was agreed to refer the matters of account to arbitration. The causes of action for detinue and for breach of contract were tried by Darling, J., and a jury. The jury found for the plaintiff in respect of wrongful dismissal £600, and £340 in respect of excess commission over and above what was earned by plaintiff's successor during the six months from October 1905 to April 1906. As to the damages of £600 for wrongful dismissal a controversy ensued whether the £600 was intended to include salary for the six months, or merely damages because of the abrupt and oppressive way in which the plaintiff's services were discontinued and the loss he sustained from the discredit thus thrown upon him. And, finally, a question of law was argued whether or not such damages could be recovered in law. To my mind it signifies nothing in the present case whether the claim is to be treated as for wrongful dismissal or not. In any case there was a breach of contract in not allowing the plaintiff to discharge his duties as manager, and the damages are exactly the same in either view. They are, in my opinion, the salary to which the plaintiff was entitled for the six months between October 1905 and April 1906, together with the commission which the jury think he would have earned had he been allowed to manage the business himself. I cannot agree that the manner of dismissal affects these damages. Such considerations have never been allowed to influence damages in this kind of case. An expression of Lord Coleridge, C.J., has been quoted as authority to the contrary. I doubt if the learned Lord Chief-Justice so intended it. If he did I cannot agree with him. If there be a dismissal without notice the employer must pay an indemnity, but that indemnity cannot include compensation either for the injured feelings of the servant or for the loss he may sustain from the fact that his having been dismissed of itself makes it more difficult for him to obtain fresh employment. The cases relating to a refusal by a banker to honour cheques when he has funds in hand have, in my opinion, no bearing. That class of case has always been regarded as exceptional. And the rule as to damages in wrongful dismissal, or in breach of contract to allow a man to continue in a stipulated service, has always been, I believe, what I have stated. It is too inveterate to be altered now even if it were desirable to alter it. Accordingly I think that so much of the verdict of £600 as relates to that head of damages cannot be allowed to stand. As there is an additional dispute how much of it does relate to that head of damages the best course will be to disallow the £600 altogether, and to state in the order that plaintiff is entitled to be credited in the account which is to be taken with salary from October 1905 to April 1906. As to the £340, I think there was evidence on which the jury were entitled to find that the plaintiff couldPage: 565 ↓
Lord James of Hereford—I concur in entirety with the judgment delivered by my noble and learned friend on the Woolsack, but I wish to add a few words as to the claim for damages on the ground that there has been an aggravation of the injury in consequence of the manner of dismissal. The reason I wish to add a few words is because I know that my noble and learned friend Lord Collins entertains the view that in an action of contract there can be such damages as those to which I have referred. I regret I cannot join with him in that view. I have read the judgment of my noble and learned friend and endeavoured to give the fullest consideration to it, and yet I do not see, either from authority or from the reasoning which is to be found in that judgment, that such damages can be recovered in an action of contract. I may say that if I had arrived at a different conclusion I should have been subjected to some feeling of remorse, because during many years when I was a junior at the Bar, when I was drawing pleadings, I often strove to convert a breach of contract into tort in order to recover a higher scale of damages, it having been then, as it is now, I believe, the general impression of the profession that such damages cannot be recovered in an action of contract as distinguished from tort, and therefore it was useless to attempt to recover them in such a case. That view, which I was taught early to understand was the law in olden days, remains true to this day. Therefore I feel bound to say, for the reason I have given, that I concur in that portion of the Lord Chancellor's judgment as well as the rest.Lord Atkinson —I entirely concur in the judgment of the Lord Chancellor. The rights of the plaintiff are in my opinion clear. He had been illegally dismissed from his employment. He could have been legally dismissed by the six months' notice which he in fact received, but the defendants did not wait for the expiration of that period. The damages which he sustained by this illegal dismissal were(1) the wages for the six months during which his former notice would have been current;(2) the profits or commission which would in all reasonable probability have been earned by him during the six months had he continued in the employment; and possibly(3) damages in respect of the time which might reasonably elapse before he could obtain other employment. He has been awarded a sum of some hundreds of pounds, not in respect of any of these heads of damage, but in respect of the harsh and humiliating way in which he was dismissed, including, presumably, the pain which he experienced, as is alleged by reason of the imputation upon him conveyed by the manner of his dismissal. This is the only circumstance which makes the case of general importance, and this is the only point with which I think it necessary to deal. I have been unable to find any case decided in this country in which any countenance is given to the notion that a dismissed employee can recover, in the shape of exemplary damages for illegal dismissal, in effect damages for defamation—for it amounts to that—except in the case of Maw v. Jones , 25 Q. B. Div. 107. In that case Mathew, J., during the argument, while counsel was urging, on the authority of Hartley v. Harman , 11a. A. & E. 798, that the measure of damages for the improper dismissal of an ordinary domestic servant was a month's wages and nothing more, interjected, no doubt in the shape of a question, the remark, “Have you ever heard the principle applied to a case where a false charge of misconduct has been made?” But the decision was that the direction of the Judge at the trial was right. Now, what was the character of that direction? The defendant had power to dismiss his apprentice, the plaintiff, on a week's notice, and had also power to dismiss him summarily if he should show a want of interest in his work. He dismissed the apprentice summarily without notice, assigning as a reason that he had been guilty of frequent acts of insubordination, and that he had gone out at night without leave. The Judge at the trial told the jury that they were not bound to limit the damages to the week's notice which he had lost, but that they might take into consideration the time which the plaintiff would require to get new employment, and the difficulty which he would have, as a discharged apprentice, in getting employment elsewhere, and it was on this precise ground that the direction was upheld. I do not think that this case is any authority whatever for the general proposition that exemplary damages may be recovered for wrongful dismissal, still less, of course, for breach of contract generally; but such as it is, it is the only authority in the shape of a decided case which can be found upon the first-mentioned point. I have always understood that damages for breach of contract were in the nature of compensation, not punishment, and that the general rule of law applicable to such cases was in effect that stated by Cockburn, C.J., in Engel v. Fitch , L. Rep. 3 Q.b. B. 114, in these words—“By the law, as a general rule, a vendor who from whatever cause fails to perform his contract is bound, as was said by Lord Wensleydale in a case which has been referredPage: 566 ↓
Lord Collins —The question which at the close of the argument I desired time to consider was whether in an action for wrongful dismissal the jury in assessing the damages are debarred from taking into their consideration circumstances of harshness and oppression accompanying the dismissal and any loss sustained by the plaintiff from the discredit thus thrown upon him. The jury in this case obviously did take these circumstances into consideration, for they assessed the damages at £600. The contention of the defendants is that the damages must be limited to the salary to which the plaintiff was entitled for the six months between October 1905 and April 1906, together with the commission which the jury should think that he would have earned had he been allowed to manage the business himself; that the manner of dismissal has never been allowed, and ought not to be allowed, to influence damages in a case of this kind. This contention goes the length of affirming that in cases ofPage: 567 ↓
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Lord Gorell —[ After stating the facts ] — The legal point is thus raised, whether in the plaintiff's action for breach of contract to employ him the defendants can be made liable, in addition to damages for the loss to the plaintiff of the benefit of the contract, for damages for the manner in which the contract has been put an end to. The general rule is clear that damages in contract must be such as flow naturally from the breach, or such as may be supposed to have been in the contemplation of the parties as the result of the breach. The latter branch of the rule is inapplicable to the facts of this case, for it was not suggested that there were any consequential damages within the contemplation of the parties. Under the first branch of the rule the plaintiff recovers the net benefit of having the contract performed. He is therefore to be put in the same position as if the contract had been performed. If it had been performed, he would have had certain salary and commission. He loses that and must be compensated for it. But I am unable to find either authority or principle for the contention that he is entitled to have damages for the manner in which his discharge took place. According to my view none of the cases which have been referred to establish the proposition contended for. The case of Maw v. Jones ( cit .), which was relied on, does not when examined support the contention. The plaintiff has attempted to suggest that the manner of his dismissal has cast a slur upon his character, and he has really endeavoured to claim damages for defamation, and to turn the action for the loss of the benefit of the contract into an action of tort, with the result of attempting to give the jury a discretion uncontrolled by the true consideration, namely, what is the money loss to the plaintiff of losing the benefit of the contract? I consider further that there was nothing in the manner of the plaintiff's dismissal which was different in any legal sense from what would have been the case if his employment had been terminated at the end of six months. At the same time his authority as agent and at the bank would have come to an end and been notified, and his successor would take his place. This was done six months sooner than the defendants had a right to act. In my opinion the verdict for £600 cannot in the circumstances stand. With regard to the £340 for extra commission, the plaintiff's right to this depends upon whether there was evidence which the jury were entitled to consider to show that had he remained agent for the six months he would have been able to earn more profits for the agency than were actually earned. Having studied the evidence with care, I have come to the conclusion that there was some evidence upon the point, and I think that the jury were entitled to act upon it if they thought fit to do so. As to the remaining points, I do not think it necessary to add anything to the observations of the Lord Chancellor, and I concur in the judgment which he has proposed.Lord Shaw — As to the question of wrongful dismissal, I should be sorry that verdicts of this kind should be upset on any question of terminology, and I cannot conceal from your Lordships my opinion that much of the discussion was based upon grounds which are rather terminological than real. It was much pressed upon us, for instance, in argument, that the plaintiff in the measurement of his rights or of his loss (to use a neutral term) must be either off or on with the contract,Page: 569 ↓
Page: 570 ↓
Judgment appealed from reversed.Counsel for Appellant — Duke, K.C.— Groser. Agents— Wansey, Stammers, & Co., Solicitors.Counsel for Respondents— Lush, K.C.— Schiller. Agents— Broad & Co., Solicitors.