The plaintiff had been wrongly dismissed. He came to be employed by Martindale at a lower salary, and bought shares in Martindale and Ventilation which increased in value.
Held: The new salary and the increase in the value of the Martindale shares were brought to account when assessing damages, but not the increase in the value of the Ventilation shares, on the ground that that benefit was not a direct result of the dismissal but was an ‘entirely collateral benefit’.
When looking at the damages to be awarded on a breach of contract by an employer, ‘the first task is to estimate . . what the Plaintiff would have gained . . if the defendant had fulfilled his legal obligation and had done no more.’
‘Martindale stands on a little different footing. His salary of pounds 1,500 was very low for a man of his ability: and it looks as if he was getting, in addition, a concealed remuneration by a profit on his shares in the company. In the course of the argument Russell LJ worked out the estimated improvement in his equity over the period from August, 1964, to March, 1967, in so far as it was due to his work. It comes to pounds 2,066. I think that the plaintiff should give credit for that figure in addition to the actual earnings of pounds 3,717 9s. 2d.’
The employment relationship does not give rise to any promise that an employee will receive any salary increases or even be considered for salary increases.
Diplock LJ qualified the principle that where the defendant in breach has the option of performing a contract in alternative ways, damages for breach by him must be assessed on the assumption that he will perform in the way most beneficial to himself and not in that most beneficial to the plaintiff, by stating that one ‘must not assume that [the defendant] will cut off his nose to spite his face and to control events so as to reduce his legal obligations to the plaintiff by incurring greater loss in other respects’.
Russell LJ said: ‘Finally, there is the question whether any and what deduction should be made from the damage suffered on account not only of his salary earned and expected in the period from Martindale, but also on account of the undoubted fact that the expenditure of the time released to him by the wrongful dismissal has enabled him by his work and management during that time to enhance the value of the half interest in Martindale that he bought for pounds 1,500 shortly after his dismissal. I agree that account should be taken of this, though of necessity a fairly high degree of estimation is involved. The master held that in all the circumstances it was reasonable that the plaintiff should go into Martindale on the terms on which he did, rather than hawk his services around. One of the reasons for saying that it was reasonable is that avowedly the plaintiff was hoping to gain in part by improving by his own efforts the value of his holding as well as, in other part, by a relatively low salary. To the extent that this hope has been fulfilled in the relevant 2? years, it seems right to set it against his loss of salary from the defendants. As to the method of assessment of the extent to which his released time has contributed to the increase in value of his interest, the following calculation leads to the figure of pounds 7,768 mentioned by the Master of the Rolls’
Russell LJ continued: ‘I turn to the question of Ventilation and the plaintiff’s investment therein. I can see no justification for considering this investment as of any relevance to the damage occasioned by the wrongful dismissal. It was an investment of money and nothing more. Its profitability or otherwise cannot be attributed to his release from his obligation to devote his time to the service of the defendants; because such minimal time as he devoted to the affairs of Ventilation cannot seriously be regarded as having been made available to him by his dismissal. It is of course true that during his employment he was barred from such investment in a company carrying on this particular type of business, which is in France in competition with the defendants. But that does not suffice to entitle the defendants to set off any improvement in the value of the plaintiff’s shareholding against his loss of salary and bonus. It is simply a question of turning his private money or credit to account and not his time and work. It is no different from an investment which he could have made during his continued service.’
Judges:
Lord Denning MR, Diplock LJ, Russell LJ
Citations:
[1966] 3 All ER 683, [1967] 1 QB 278, 1 KIR 312, [1966] 3 WLR 706, [1966] EWCA Civ 4
Links:
Jurisdiction:
England and Wales
Cited by:
Cited – Edwards v Chesterfield Royal Hospital NHS Foundation Trust QBD 31-Jul-2009
The claimant, a consultant surgeon had been subject to disciplinary proceedings by his employer. They were however conducted in a manner which breached his contract. The GMC had summarily dismissed the same allegations. The claimant now appealed . .
Cited – Fulton Shipping Inc of Panama v Globalia Business Travel SAU (Formerly Travelplan SAU) of Spain ComC 21-May-2014
The former owners of the ‘New Flameno’ appealed from an arbitration award. A charter of the vessel had been repudiated with two years left to run. The owners chose to sell. They made a substantial profit over the price they would have received after . .
Cited – Fulton Shipping Inc of Panama v Globalia Business Travel Sau CA 21-Dec-2015
The charter of the ship ‘New Flameno’ was repudiated two years early. The owners sold it, making rather more profit than they would have if sold after the end of the term. The court was now asked how the profit should affect the loss claim on the . .
Lists of cited by and citing cases may be incomplete.
Employment, Contract, Damages
Updated: 16 August 2022; Ref: scu.416163
