Automatic Fire Sprinklers Pty Ltd v Watson
[1946] ALR 390(Judgment by: Dixon J)
Automatic Fire Sprinklers Pty Ltd
vWatson
Judges:
Latham CJ
Rich J
Starke J
Dixon JMcTiernan J
Williams J
Legislative References:
Arbitration Act 1902 (NSW) - s 9(a); The Act
National Security Act 1939-1943 - s 10
Judgment date: 23 August 1946
Sydney
Judgment by:
Dixon J
In certain forms of executory contract where the promise of one party is to pay the other money in consideration of his transferring property, of his doing work, of his serving the former as his master, and, perhaps, of his providing other tangible things or definite services, the money to be paid is regarded as the price of or reward for the property or service when and so often as the transfer of the one or the performance of the other affords an executed consideration. In these contracts the promise to pay the price or reward is not construed as a simple obligation to pay a sum or sums at a future date supported solely by a consideration consisting in the corresponding promise to transfer the property, do the work, serve, or provide the things or services by the other party, so that a mere readiness and willingness on the one side of the latter to perform his part is enough to entitle him to the payments, notwithstanding that, whether owing to the fault of the former, or without fault on either side, the property is not transferred, the work is not done, the relation of master and servant ceases, or the things or services are not provided. The most familiar example is that of the sale of goods. There the common understanding of an agreement to sell is that it is the goods and not the promises to deliver that are to be paid for. The result is that, if the seller tenders goods in accordance with his contract but the buyer rejects them in breach of his contract, the seller cannot sue for the price; his remedy is for unliquidated damages for non-acceptance: Cp. Plaimar Ltd. v. Waters Trading Co. Ltd.(1).
It is nothing to the point that the seller remains ready and willing to deliver the goods and refuses to treat the rejection as discharging the contract but, on the contrary, "keeps it open." Even so the price is not payable, for the reason that it is for the goods that the price is to be paid and until they are accepted there is no indebtedness. It is, of course, open to contracting parties to make what agreement they like about the matter. They may, if they choose, contract for payment of a sum certain at a time certain and make it clear that the payment is independent of the transfer of the goods. But that is not how an agreement to sell is ordinarily understood. The point is well brought out by the differences of opinion which have arisen concerning contracts for the sale of land. At one time there was a tendency to say that instalments of purchase money could not be recovered by a common law action because the purchase price was payable for the land, not for the promise to convey, and was, therefore, not recoverable except upon conveyance (Laird v. Pim(2); Smith v. Noske(3); and see per Salmond J. in Ruddenklau v. Charlesworth(4)). That is to say the construction given to the promise of the purchaser of land was like that given to the promise of the buyer of goods. The result would have been that a vendor of land could sue at law only for damages for loss of the sale. But more lately instalment contracts for the purchase of land have been treated as importing an obligation on the part of the purchaser to pay sums certain on fixed dates in exchange for a promise to convey and at the risk that, for some unforeseen reason, a conveyance may never be obtained. A discussion concerning these rival views of the character of the contract for the sale of land on terms and concerning the authorities in which they appear will be found in Reynolds v. Fury(5). One view of the payment in advance of the price, whether for land or for goods, is that, even where it is stipulated for independently of the actual transfer of the property, it can amount to no more than the provision of a sum in the hands of the vendor to be applied by him in satisfaction of the debt arising from the transfer of the property in the goods or the land when it is accomplished. That is to say that, at most, it is a payment of a debt in advance, a debt that can only arise from the execution of the consideration. Up till then it is a promise to pay money which if fulfilled or enforced, results in a provisional payment defeasible by the subsequent failure, for any cause, of the real consideration. It is a payment made in advance to await application in discharge of an indebtedness which arises immediately the consideration is executed (See Timmins v. Gibbins(1)).
A contract for the establishment of the relation of master and servant falls into the same general category of agreements to pay in respect of the consideration when and so often as it is executed, and is, therefore, commonly understood as involving no liability for wages or salary unless earned by service, even though the failure to serve is a consequence of the master's wrongful act.
It is, of course, possible for the parties to make a contract for the payment of periodical sums by the master to the servant independently of his service. Indeed that is, in effect, what the Duke of Westminster persuaded the majority of the House of Lords he had done in Inland Revenue Commissioners v. Duke of Westminster(2). But, to say the least, it is not usual. The common understanding of a contract of employment at wages or salary periodically payable is that it is the service that earns the remuneration and even a wrongful discharge from the service means that wages or salary cannot be earned however ready and willing the employee may be to serve and however much he stand by his contract and decline to treat it as discharged by breach. See Archard v. Hornor(3); Snelling v. Lord Huntingfield(4); Smith v. Hayward (5); Fewings v. Tisdal(6); Emmens v. Elderton(7), more particularly the advice of Crompton J. to the House; Brace v. Calder(8); Petrie v. Mac Fisheries Ltd.(9).
His only remedy is in unliquidated damages for wrongful dismissal. By keeping his contract open, he may be able to resume his service without a new contract, if his employer is induced to retract the discharge. A good illustration of the situation is given by the facts and decision of the otherwise not very notable case of Barnsley v. Taylor(1). There the employee under a contract for a term was dismissed without sufficient justification. He proffered his services, and in the County Court sued for and recovered wages for the period he was excluded from his employment. He was then taken back by his employer but again dismissed without just cause. Again he sued, this time for wrongful dismissal. But he was met by the fact that in his former action he had recovered judgment; and, it was said, since wages under the contract could not be recovered for a period in which there was no service, he must be considered to have recovered damages for wrongful dismissal. Ergo, the old contract had been discharged by breach, judgment had been recovered for the breach and when he went back to the employment it must have been under a new contract of service. Non constat that it was not a service at will. At all events, there was no evidence of a contract for a term and the second action, therefore, failed.
Some difficulty has been felt in saying what is the service which carries wages. The wages are incident to the subsisting relationship of master and servant. A master who sends his servant upon a holiday upon full pay can be sued for wages under the contract, although not on a common count for work and labour done. They also serve who only stand and wait. Difficulties, too, arise from the fact that a refusal to work on the part of a servant, who neither leaves his master's service nor is discharged, may disentitle him to wages for the period of the refusal. That is for non-fulfilment of the conditions by which wages are earned. But, broadly speaking, it is enough to say that wages are for the service reasonably demanded under a subsisting relationship of master and servant. That relationship may be ended by the servant forsaking the master or the master discharging the servant, although the act of the one or of the other amounts to a breach of contract.
In the present case the question for decision is, in substance, whether the general manager of two companies which, without justification, purported to dismiss him from that position can recover wages for a period in which he continued to proffer his service, or must be content with unliquidated damages. The contract of employment consists in a document under the seals of the companies and possibly that of the employee, containing special terms. But, in my opinion, the terms include no provision which could take the employment out of the category I have discussed. That is to say, there is nothing in the agreement which makes the payment of salary independent of actual service, or which would operate to give the employee a title to salary, notwithstanding that he had been discharged from the service of the companies, however wrongfully.
But the case presents a special complication because of the National Security (Man Power) Regulations. These Regulations remained in force until 12th September 1945. It was on 29th September 1944 that the companies purported to dismiss the general manager from that position. Their business was a protected undertaking. Regulation 14 provided that an employer carrying on a protected undertaking should not, without the permission of the Director-General of Man Power, or of a person authorized by him, terminate the employment in the undertaking of any person employed therein. In view of this prohibition, the resolution for the removal of the employee from his position of general manager was not expressed as a complete discharge from the service of the companies. After resolving that the agreement be determined, the resolution proceeded to say that from the determination of the agreement and until it was otherwise decided the employee's position and duties in the company be New South Wales sales manager; that his salary should be £10 a week, an amount much lower than his salary as general manager; and that he should have six months' leave of absence.
The agreement contained clauses for the termination of the agreement (1) without cause by three months' notice and (2), if the directors were of opinion that the employee had become unfit to act as general manager, by one month's notice, or upon payment of a month's salary in lieu of notice. It was under the second clause that the companies purported to act, but a finding has been made that the directors did not hold in fact the prescribed opinion which they professed. It had been resolved three months before to terminate the agreement by due notice, but, in serving the notice, a mistake was made and a day less than the full three months was allowed. That notice was, therefore, abortive. The notice of 29th September 1944 to the employee purporting to terminate his employment followed fairly closely the resolution of that day. It is apparent that these materials left room for the view that what the companies did amounted not to a purported discharge of the employee from their service but to an unjustifiable attempt to vary the terms of his employment. The matter, however, came before the Supreme Court, whose decison is under appeal, upon an award in the form of a special case and we have before us only findings of the ultimate facts without any statement of the evidentiary circumstances. The findings in relation to the acts of the employee are, that he did not accept the purported dismissals as terminating his employment; that he continued to attend the joint offices of the companies and was ready and willing to perform the duties of general manager and did perform some of the work previously done by him as general manager; that he maintained an attitude that his employment as general manager was still subsisting; that he did not at any time accept the appointment as New South Wales manager, or any other new appointment in the service of either company; and that he declined to accept the salary of £10 a week and in fact received no payment from the companies.
It will be seen that there is no finding that the companies, or either of them, accepted any of the services of the employee.
As to the acts of the companies, the findings have all the appearance of careful framing. In the first place, the arbitrator said that, on the whole of the evidence before him relating to 29th September 1944, he found as a fact, that on that date each of the companies purported to dismiss the employee from his position of general manager. Then he found that each of the purported dismissals was a wrongful repudiation of the employee's contract of employment and, if effective in law to determine his employment, was a wrongful dismissal of the employee. The arbitrator then proceeded to state the contention made before him on the part of the employee. That contention was that the purported dismissals were ineffectual to determine his employment for the reasons:-"(1) that by reason of reg. 14 of the National Security (Man Power) Regulations each of the purported dismissals was in law a nullity; and (2) that a purported dismissal of a servant, if wrongful, does not determine the servant's employment unless it be accepted by him as a determination thereof."
Finally, the arbitrator said that, if the contention should not be upheld for either of the foregoing reasons, he found that the employee was wrongfully dismissed by each of the companies on 29th September 1944; but, if it should be so upheld, then he found that the employee's employment as general manager was not determined on 29th September 1944 or at any date before 19th September 1945. On the latter date, the Man Power Regulations at that time being no longer in operation, the employee was excluded by the companies from their joint offices and then wrongfully dismissed, if the employment had not earlier terminated, that is on the former date.
For the employee, who is the respondent on the appeal, it was suggested that the arbitrator did not mean to find that the employee had been discharged from the service of the companies unless, on one or other of the grounds assigned, the purported dismissal was ineffectual to terminate his employment. It was said that the word "employment" had been used not to mean the relationship of master and servant, but the contract under seal pursuant to which that relationship had arisen. The purpose, it was contended, of the speaking award was to raise the question whether, (1) under the general law; (2) under the Man Power Regulations, it was possible for the one party to bring the binding operation of such an agreement to an end by a repudiation on his part not accepted by the other party as discharging the latter from further performance, it being assumed that the actual relationship of master and servant continued to subsist in some way or other.
I do not so read the award in the form of a special case. I understand it to mean that, unless the law prevented it, the companies had discharged the employee from their service, although, of course, wrongfully. However, if the fate of the appeal depended upon the interpretation which we attach to the award, I think, in view of the evident differences between the parties upon the subject, it might have been proper to make an order remitting the award to the arbitrator for his re-consideration and to accompany the order with declarations expressing the Court's decision upon the questions of law which appeared to be raised.
For the reasons I gave in the earlier part of the judgment, I think that there is nothing in the general law preventing the wrongful dismissal of a servant operating to discharge him from service, notwithstanding that he declines to accept the dismissal as absolving him from further performance but keeps the contract open and remains ready and willing to serve.
There is nothing in the special terms of the contract in this case entitling the employee to salary in respect of a period in which he did not serve and, therefore, apart from the effect of the Man Power Regulations, the employee's remedy would from 29th September 1944 be for unliquidated damages.
But the provisions of Part II. of the Man Power Regulations governed the parties until 12th September 1945 and the question is whether they made it impossible that the de-facto discharge of the employee from the service of the companies should operate to disentitle the employee to salary for the period during which he continued to proffer his services as general manager after the de-facto discharge.
Regulation 14 is expressed to forbid in a protected undertaking not only the termination by the employer of the employment without permission, but also his standing the employee down or suspending him from duty. On the other side, it forbids the employee to terminate or change his employment without permission. So far it resembles the Essential Work Orders of the United Kingdom. It does not, however, contain a provision like art. 4 (1) (d) of the English Essential Work (General Provisions) Order 1942, which requires the employer in respect of every prescribed period to pay every specified person, that is the employee falling within the category (except as there otherwise provided) a sum not less than the normal wage for that period, if the person is during the normal working hours-(i) capable and available for work; and (ii) willing to perform any services outside his usual occupation which in the circumstances he can reasonably be asked to perform during any period when work is not available for him in his usual occupation in the undertaking.
Under the Essential Work Orders of the United Kingdom two decisions have been given in England, which, unless they are distinguished on the ground of this difference in provision or we think that for some reason we ought not to follow them, lead to the conclusion that the Regulations made ineffectual any attempt by an employer contrary to their provisions to discharge a servant who remains ready and willing to serve. The attempt is made ineffectual with the result that the relationship continues with the consequent liability on the employer's part for wages for any period for which the employee offers his services. The first decision is George v. Mitchell & King Ltd.(1). There the employer replaced a foreman by another man and offered the foreman work at a lower wage in an inferior grade, which the employee refused. The national service officer declined to give his permission for the course adopted. After about six weeks of idleness the man accepted temporary work at lower wages with the informal consent of that officer. The Court of Appeal decided that for the interval the employee was entitled to his wages, but that, after taking other employment, he was not entitled under the Order to the difference in wages which he had lost as he claimed through his dismissal contrary to the Order. I am not sure of the ground on which Scott L.J. met the point that there had been a dismissal de facto and that wages were only earned by service. It may be that his Lordship relied on art. 4 (1) (d) for the purpose. But Mackinnon L.J. met it on the ground that the notice given without permission by the employers to the employee was ineffective, by reason of the Order, and the contract of service continued. "The defendants refused to let him work," his Lordship proceeded, "I do not agree with the judge that the only result of this was that the defendants became liable to prosecution but the plaintiff has no claim for his wages. I think that he had a claim for wages while, pursuant to the order, his contract of employment continued in existence"(1).
Goddard L.J. said: "It seems to me that the order imposes a statutory condition or provision on the contract. If a statute says that a person shall not terminate a contract except with the permission of a third person, in my opinion it follows that he is incapable of terminating it without that permission. If he refuses to employ the person he commits an offence, but the contract is not terminated. I cannot see that there is any difference between saying a person shall not terminate an employment and an employment shall not be terminated. If the employment cannot be terminated, it remains in force with all its consequences; the employed person remains in the service, and consequently has a right to his wages, and it is only fair that he should have this right as he cannot enter employment elsewhere unless and until he gets permission of the national service officer"(1).
Two of the Lord Justices, therefore, appear to decide the matter upon the effect of a prohibition indistinguishable in form and policy from that contained in reg. 14.
The second case is Woolley v. Allen Fairhead & Sons Ltd.(2), decided by Atkinson J. The facts were that the employee was dismissed by a week's notice given without the permission of the national service officer and, by agreement, ceased work a day or so before the expiration of the notice. A fortnight later the national service officer gave his permission for the termination of the service, but the employee successfully appealed against that decision and his reinstatement was ultimately ordered. He sued for his wages for the whole intermediate period from the time he had ceased work. Atkinson J. held that the notice was ineffective to terminate the employment, since permission had not been given and, therefore, that the contract of service continued throughout and the employee was entitled to wages.
I am afraid that, but for the guidance of authority, I should have regarded the Regulations as attempting to prevent the unpermitted discharge of a man from employment only by penalizing it and not as making the relationship legally infrangible. But I think that we should apply the two decisions I have mentioned to the Man Power Regulations. No doubt points of distinction may be found between the United Kingdom Order and these Regulations. But these points of distinction do not appear to affect the ratio decidendi of Mackinnon and Goddard L.JJ. (1) or of Atkinson J. (2), and I see no reason why in the interests of consistency of decision this Court should not follow their authority.
I am, therefore, of opinion that we should hold that the employee in the present case is entitled to salary or remuneration until the Man Power Regulations went out of operation.
I would, therefore, answer the questions of law submitted by the Award for the opinion of the Court as follows:-
- (1)
- The purported dismissal referred to was ineffectual in law to terminate the respondent's employment as general manager, by reason of reg. 14 of the National Security (Man Power) Regulations.
- (2)
- The question does not arise.
This means that in substance the appeal fails.