Automatic Fire Sprinklers Pty Ltd v Watson

[1946] ALR 390

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(Judgment by: Williams J)

Automatic Fire Sprinklers Pty Ltd
vWatson

Court:

Judges: Latham CJ
Rich J
Starke J
Dixon J
McTiernan J

Williams J

Legislative References:
Arbitration Act 1902 (NSW) - s 9(a); The Act
National Security Act 1939-1943 - s 10

Hearing date: 25 July 1946, 26 July 1946, 29 July 1946
Judgment date: 23 August 1946

Sydney

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Judgment by:
Williams J

This is an appeal from the answers given by the Full Supreme Court of New South Wales to certain questions of law submitted in the form of a special case for the opinion of the Court under the Arbitration Act 1902.

From the facts stated by the arbitrator in the special case it appears that by an agreement under seal made on 12th October 1938 the appellant companies appointed the respondent general manager of their respective businesses for a term of six years computed from 1st October 1937. Clause 8 of the agreement provided that if in the opinion of the directors of the first-named company the respondent should become unfit to act as general manager the board of directors might, in their discretion, give him one month's notice of termination or pay him one month's salary in lieu of notice. Clause 12 provided that in the event of his continuing in their employ (which happened) after the expiration of six years the conditions of the agreement should apply to and be binding on the parties during such continued employment, provided that either the first-named company or the respondent should have the right to determine such continued employment by giving to the other three months' notice in writing. Clause 5 provided that as consideration for his services the respondent should be paid £850 per annum payable weekly, and certain travelling and entertainment expenses and annual bonuses.

By letter dated 29th June 1944 the company gave the respondent notice that the agreement would terminate at the expiration of three months from that date. But the letter was not handed to the respondent until the following day and it was conceded before the arbitrator and he found that this letter was not therefore a proper notice of termination within the meaning of clause 12.

On 29th September 1944 (the date on which the previous notice if valid would have expired) the company handed the respondent a further letter purporting to dismiss him on the ground that the directors of the company were of the opinion that he had become unfit to act as general manager, and tendering him a cheque for one month's salary in lieu of notice which he refused to accept. This letter stated that the termination of the agreement did not terminate his employment with the appellants, and that until further notice his position and duties would be New South Wales sales manager at a salary of £10 per week. It also stated that he was given six months' leave of absence on full pay from 3rd October.

The arbitrator found that the directors of the company were not at the time of passing the resolution really of the opinion that the respondent was unfit to act as general manager. Upon 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 respondent from his position of general manager, but that he did not at any time accept either of such purported dismissals as terminating his employment. He also found that throughout the period from that date to 19th September 1945 the respondent continued to attend the joint office 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, and that he maintained the attitude that his employment as general manager was still subsisting; but that the companies maintained the attitude that his employment as general manager had been determined on 29th September 1944 and were ready and willing to pay him the salary of £10 per week; but he declined to accept that salary, and in fact received no payment from the companies. The arbitrator further found that on 19th September 1945 the companies excluded the respondent from their office, and that the respondent was on that date wrongfully dismissed from his employment as general manager under the agreement, if such employment had not been terminated on 29th September 1944.

The questions of law which the arbitrator submitted for the opinion of the Court were as follows:-

(1)

Whether, on the facts as found by me, the purported dismissal of Watson by the companies on 29th September 1944 was ineffectual in law to terminate Watson's employment as general manager, by reason of: (a) reg. 14 of the National Security (Man Power) Regulations, or (b) Watson's non-acceptance of the purported dismissal as terminating his employment.

(2)

If Question 1 be answered: (a) No, (b) No, Whether the measure of the damages to which Watson is entitled by reason of his wrongful dismissal on 29th September 1944 is limited, having regard to the facts stated in pars 7 to 16 inclusive of this case, to an amount equal to the remuneration he would have earned by the continuance of his employment for one additional day.

The Supreme Court answered Question (1) in the affirmative on both grounds and it therefore became unnecessary to answer Question (2).

It will be convenient to discuss the position at common law in the first instance. The arbitrator found that during the period 29th September 1944 to 19th September 1945 the respondent was able to perform some of his duties as general manager and was always ready and willing and offered to perform all these duties completely. But the consideration for his remuneration was the performance of the whole of the duties so that a partial performance would not be sufficient. Neither the notice of 29th June nor that of 29th September 1944 was a valid termination of the agreement. His dismissal from the position of general manager on 29th September 1944 was therefore wrongful. The appellants were then protected undertakings within the meaning of the National Security (Man Power) Regulations and they continued to be so until 19th September 1945. This no doubt explains why they did not exclude the respondent from the joint office prior to this date. They evidently thought that if they continued to employ him in some capacity they would not infringe the provisions of reg. 14. But they maintained that after 29th September 1944 the respondent was employed only as New South Wales sales manager at a salary of £10 per week and they would not allow him to act as general manager. He was with respect to his services in an analogous position to the vendor of goods in which the property has not passed, which the purchaser wrongfully refuses to accept. Such a vendor can only sue for the damage which he has suffered by the refusal of the purchaser to accept the goods. So an employee who is wrongfully dismissed can only sue for the damage which he has suffered by the employer depriving him of the right to give his services and thereby earn his remuneration. He cannot continue to offer his services and sue for his remuneration as a debt as and when it becomes due and payable under the terms of his employment. The law is, I think, correctly stated in Halsbury's Laws of England, 2nd ed., vol. 22, pp. 167-169, where the cases are collected. It is epitomized in the judgment of Erle J. in Goodman v. Pocock(1). He said, "I think that the servant cannot wait till the expiration of the period for which he was hired, and then sue for his whole wages on the ground of a constructive service after dismissal. I think the true measure of damages is the loss sustained at the time of the dismissal. The servant, after dismissal, may and ought to make the best of his time; and he may have an opportunity of turning it to advantage."

In Barnsley v. Taylor(2), Lush J. said, "The ... contract was broken by the wrongful dismissal of the respondent; he had at that time no other cause of action except for that breach of the contract."

The employer cannot discharge the contract of employment by a unilateral breach. But if he refuses to allow the employee to do his work and earn his remuneration, the employee cannot sue for specific performance. The result is that, while the contract is not discharged, its purposes have failed. The employee is relieved from further fulfilling the obligations which he has undertaken by the contract to the employer and the contract survives only for the purpose of measuring the claims arising out of the breach: General Billposting Co. Ltd. v. Atkinson(3); Heyman v. Darwins Ltd.(4).

Question (1) (b), although somewhat awkwardly expressed, appears to be addressed to the question whether the respondent would, in the circumstances, have been entitled at common law for his remuneration as general manager between 29th September 1944 and 19th September 1945, and so construed should, in my opinion, be answered in the negative.

It remains to consider the position under the National Security (Man Power) Regulations. The purpose of reg. 14 was to ensure that protected undertakings should retain an adequate staff who could not be solicited and enticed away to other work. The regulation forbids an employer terminating the employment of an employee without the written permission of the Director-General or to stand him down or to suspend him from duty except as provided in reg. 16A. It also forbids an employee changing or terminating his employment without such written permission. Regulation 14 (3A) provides that if an employee is stood down or suspended from duty otherwise than in pursuance of reg. 16A he shall, on assuming duty, be entitled to be paid for that portion of the period for which he was stood down or suspended the remuneration which would have been paid to him if he had performed his duties. Regulation 16A provides that an employer can suspend an employee from duty if he has reason to believe that he has been guilty of serious misconduct. The Director-General (or on appeal, the Appeal Board) must then decide whether the suspension should be confirmed or be removed unconditionally or be removed but the person suspended should be employed in his former position or in some lesser position and the date from which and the conditions on which (including loss or partial loss of wages or pay for the whole or portion of the period of suspension) he should be so employed. If the suspension is confirmed the employment of the person suspended is deemed to have been terminated on the date on which he was suspended. If the suspension is removed unconditionally the employer must pay the person suspended the wages of which he was deprived during the period of his suspension.

Regulation 14 therefore makes it illegal and void for the employer or employee to terminate the relationship of employer and employee without permission. Regulation 16A gives an absolute right to the payment of wages in respect of the period of suspension to an employee who is lawfully suspended from work under reg. 16A but whose suspension is removed unconditionally, and a conditional right to an employee whose suspension is removed subject to conditions. Regulation 14 (3A) gives an absolute right to the payment of wages in respect of the period of suspension to an employee who is stood down or suspended from duty otherwise than in pursuance of reg. 16A. Regulation 14 does not, like the corresponding English Essential Work Order, give an express statutory right to the payment of wages whilst the employment continues and has not been lawfully terminated with the consent of the Director-General. But an undertaking was protected because it was engaged on work of national importance and employees were compelled to remain in their employment and forbidden to enlist because their services were required for this work. The whole basis of the Regulations is that the contract of employment can only be lawfully terminated in the prescribed manner. Until it is so terminated the relationship of employer and employee must continue to exist. The express provision for the payment of wages where the employment is suspended necessarily implies a right to such payment where an employee who has not been suspended offers to do his work. He cannot terminate or change his employment without permission, so that unless he is entitled to his remuneration he would starve. In Woolley v. Allen Fairhead & Sons Ltd.(1), Atkinson J. said: "A man can repudiate what he has agreed to do, but he cannot repudiate a statutory duty such as that imposed by the order, claiming that it is on the same level as a term of a contract."

The ordinary principle is that, in the absence of a sufficient indication of intention to the contrary, a transaction which is made illegal by statute is void. But the statute may indicate, either expressly or by implication, that it is not intended that the illegality shall avoid the transaction, but only that the wrongdoer shall incur some punishment. It was submitted that an employer in a protected undertaking who illegally dismissed an employee would incur punishment, but that the employee would be limited to the same remedies as he would be in the case of wrongful dismissal. But there is no indication either express or implied in the Regulations that the attempt to dismiss the employee would not be void. The indications of intention are all to the contrary. Even if the employer purported to terminate the employment without permission, the employee could not without permission accept such termination as a breach of the contract of employment. He would still have to offer his services to the employer and could not lawfully accept employment elsewhere. Any attempt by the employer or employee to repudiate the employment without permission is avoided by the Regulations. In George v. Mitchell & King Ltd.(2), Goddard L.J. said in reference to the English Essential Work Order: "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." The same view of the effect of the English order was again taken by the Court of Appeal in Marshall v. English Electric Co. Ltd.(1) and Hivac Ltd. v. Park Royal Scientific Instruments Ltd.(2). The decisions in Sputz v. Broadway Engineering Co. Ltd. (3), and Trussed Concrete Steel Co. Ltd. v. Green(4), and Alexander v. Tredegar Iron & Coal Co. Ltd.(5) are based on the same assumption. In the last-mentioned case Lord Simonds said (of a master):-"Is he to be responsible for the acts of those servants of whom he cannot, without permission of the national service officer, be rid, but rest under a new responsibility to his own servants because they cannot, if they would, be rid of him?"(6).

The attempted repudiation by the appellants of the agreement with the respondent on 29th September 1944 without the written permission of the Director-General was therefore illegal and void under reg. 14. It was equally a breach of the regulation and therefore illegal and void to attempt to demote him to the position of New South Wales sales manager without this permission (Powell Duffryn v. Rhodes(7)).

In my opinion Question (1) (a) should be answered in the affirmative.

For these reasons I would dismiss the appeal.