Atkinson.( On Appeal from the Court of Appeal in England.)
Subject_Master and Servant — Contract of Service — Stipulation by Servant in Restriction of Trade — Wrongful Dismissal — Servant Receiving Damages — Enforcement of Stipulation.
A company manager obtained damages for wrongful dismissal against the company. His contract of service had bound him not to carry on competing trade. Held that the company were no longer entitled to enforce this restriction in consequence of their breach of contract.
The appellants engaged the respondent as manager of their company for a year under a contract which bound him not to carry on a competing business at the expiry of the engagement. They dismissed him wrongfully and he recovered damages in an action against them. Afterwards he carried on a competing business and the appellants in turn sued for an injunction and damages.
The Court of Appeal ( Cozens-Hardy, M.R., Moulton and Buckley, L.JJ.) gave judgment for the dismissed manager, the respondent, reversing an order of NEVILLE, J. The company appealed.
The House took time for consideration.
Earl of Halsbury—I have had the advantage of reading the judgment which is about to be delivered by Lord Collins, and I concur in it.
Lord Robertson—[Read by the Lord Chancellor]—If this case be considered for a moment on its own merits and substance (apart in the meantime from authority), it
is extremely difficult to be reconciled to the appellants’ contention. The respondent’s position in entering into the contract is a very intelligible one. He says, I am billposter, and I desire occupation, either on my own account or in the service of others. If I enter the employment of others, I am willing to give up the right to trade on my own account to the extent specified in this agreement. I do not desire to have it both ways. The claim of the appellants, on the other hand, as now put forward, is that, taking him at his word, as expressed in the contract, and getting his services, they are to be entitled both to deprive him (against the contract) of the right to serve them and also of the right to serve himself. It seems to me that the covenant not to set up business is not only germane to but ancillary to the contract of service, and that once the contract of service is rescinded, the other falls with it. I have only to add that the suggestion that the respondent has already received his quid pro quo, in that he has had the appellants’ wages for a considerable time, ignores the equally important fact that they have had his services for the same period.
Lord Collins—I am of opinion that the unanimous decision of the Court of Appeal in this case should be affirmed. The rule pressed upon us by Mr Russell from the notes to Pordage v. Cole ( 1 Wms. Saund. 548) cannot be intended to apply to every case in which a covenant by the plaintiff forms only a part of the consideration and the residue of the consideration has been had by the defendant. That residue must be the substantial part of the contract; and if in the case of Boone v. Eyre ( 1H. Bl. 273, n) two or three negroes had been accepted and the equity of redemption not conveyed, I do not apprehend that the plaintiff could have recovered the whole stipulated price and left the defendant to recover damage for the non-conveyance. See per Pollock, C.B., delivering the judgment of the Court in Ellen v. Topp ( 6 Ex. 424). Further, in White v. Beton ( 7 H. & N. 42) Bramwell, B., quotes with approval the remark of Lord Kenyon, C. J., in Campbell v. Jones ( 6 T.R. 570)—“Whether these kinds of covenants be or be not independent of each other, must certainly depend on the good sense of the case.” The reason for the rule itself is said by Serjeant Williams to be that “where a person has received a part of the consideration for which he entered into the agreement it would be unjust that because he has not had the whole he should be permitted to enjoy that part without either paying or doing anything for it.” But in this case, as pointed out by Mr Manisty, the defendant has given an equivalent in service for the remuneration he has received in salary. He stands, therefore, outside the reason of the rule. But I think that this case may be, and in fact has been, decided on broader lines than those laid down in the notes to Pordage v. Cole as to mutual and independent covenants. I think that the true test applicable to the facts of this case is that which was laid down by Lord Coleridge, C.J., in Freeth v. Burr ( L.R., 9 C.P. 208), and approved in Mersey Steel Company v. Naylor ( 9 A.C. 434): “That the true question is whether the acts and conduct of the party evince an intention no longer to be bound by the contract.” I think that the Court of Appeal had ample ground for drawing this inference from the conduct of the employers here in dismissing the defendant in deliberate disregard of the terms of the contract, and that the latter was thereupon justified in rescinding the contract and treating himself as absolved from the further performance of it on his part. I think that the appeal should be dismissed.
Lord Chancellor (Loreburn) concurred.
Judgment appealed against affirmed.
Counsel for the Appellants— C. A. Russell, K.C.— Hildyard. Agents— Robinson & Bradley, Solicitors, for Lundi, Shortt, & Fenwicke, Newcastle-upon-Tyne.
Counsel for the Respondent— Manisty, K.C.— Dighton Pollock. Agents— Rawle, Johnstone, & Company, Solicitors, for Cooper & Goodger, Newcastle-upon-Tyne.