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Cite as: [2000] IEHC 117

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Zuphen v. Kelly Technical Services (Ireland) Ltd. [2000] IEHC 117 (24th May, 2000)

THE HIGH COURT
2000 No. 367p
BETWEEN
QUINTON ZUPHEN & ORS
PLAINTIFFS
AND
KELLY TECHNICAL SERVICES (IRELAND) LIMITED,
KELLY TECHNICAL SERVICES LIMITED AND
RAYMOND KELLY AND DECLAN KELLY
DEFENDANTS
JUDGMENT of Mr Justice Roderick Murphy delivered the 24th day of May, 2000.

1. The Plaintiffs are South African technicians and the first and second named Defendants are each a recruitment company of which the third and fourth named Defendants are directors.

2. By Plenary Summons dated the 13th January, 2000 the several Plaintiffs claim a declaration that the purported determination of their employment under contracts of employment entered into on the 27th September, 1999 with the first and/or second named Defendant is null, void and of no effect and is valid and subsisting until the 27th September, 2000.

3. The Plaintiffs also claim salaries due from the 22nd December, 1999, damages and restraining orders.

4. By Order dated the 13th January, 2000 O'Sullivan J. made certain orders in relation to the replying Affidavit to be served on the Intended Plaintiffs; to the delivery of a Statement of Claim within seven days and the delivery of a Defence within a further seven days.

5. By Defence dated the 10th February, 2000 the Defendants, inter alia, pleaded that the performance of the agreements which the second named Defendant concluded with the Plaintiffs became impossible of performance without any fault on the part of the Defendants or any of them and that the agreements were thereby frustrated.

6. The particulars of frustration contained in the Defence was stated as follows:


"It was at all times understood between the Plaintiffs and the second named Defendant that the retention of the Plaintiffs by the second named Defendant was to be in the context of carrying out work on behalf of Eircom Plc and in late December, 1999 the said Eircom work was no longer available as Eircom Plc indicated to the second named Defendant that it would not be requiring it to carry out any further. (sic). This was not due to any default on the part of the Defendants or any of them."

7. By reply dated 3rd March, 2000 the Plaintiffs, inter alia, denied that the performance of their agreements with the second named Defendant became impossible of performance without any fault of the part of the Defendants or any of them and denied that the agreements were thereby frustrated. The Plaintiffs denied that, in the premises, the Defendants and each of them were discharged from performance of the said agreements. By way of further special reply, the Plaintiffs plead that the Defendants were estopped from claiming that the agreements were frustrated because the Defendants gave the Plaintiffs unambiguous assurances that the agreements would be for at least one year.

8. Furthermore, the Plaintiffs deny that the contracts were frustrated without any fault on the part of the Defendants, or any of them, because the contract entered into by the second named Defendant and Eircom Plc provided that Eircom could only terminate the contract on the grounds of specified breach by the second named Defendant on grounds set out at clause 47 of that agreement. In the premises, the Plaintiffs plead that the termination of the contract between the second named Defendant and Eircom Plc was caused wholly and/or exclusively as a result of the breach of contract and/or negligence and/or fault of the second named Defendant, its servants or agents.

9. In addition the Plaintiffs deny that at all times it was understood between the Plaintiffs and the second named Defendant that the retention of the Plaintiffs by the second named Defendant was to be in the context of carrying out work on behalf of Eircom Plc and that in late December, 1999 the said Eircom work was no longer available as Eircom Plc indicated to the second named Defendant that it would not be requiring it to carry out any further work. The Plaintiffs further deny that this withdrawal was not due to any fault on their part.

10. The Plaintiffs also plead that if there were any frustration of the contract between Eircom Plc and the second named Defendant (which is denied) then the same was induced by the second named Defendant through its own fault.

11. An amended Statement of Claim was delivered on the 8th March, 2000 which gave particulars of the agreements and of damage, loss, distress and inconvenience.

12. By Notice of Preliminary Issue dated 24th March 2000 the Plaintiffs and the Defendants agreed and the Court ordered as follows:


"That this Honourable Court does direct the trial of the issue of frustration as the sole issue of liability in these proceedings (save for the contention of the Defendants that the Plaintiffs listed under Schedule 1 thereof resigned and/or terminated their contracts with the Defendants, which said resignation and/or termination gave rise to a termination of any liability to those Plaintiffs on the part of the Defendants, which issue shall be tried along with the assessment of damages in the event of the Plaintiffs in the action succeeding on the issue of frustration before this Honourable Court)."

13. A subpoena duces tecum was served on the Company Secretary of Eircom Plc on the 5th April, 2000.

14. By amended reply and Defence to counter claim delivered the 6th April, 2000 the Plaintiffs denied that they terminated or repudiated their contract of employment or agreed to release the Defendants from the contractual obligations and that the Defendants are estopped from so contending.


EVIDENCE

15. The matter came before the Court on Tuesday 11th April. It was agreed that the Defendants, in respect of the preliminary issue would first give evidence.

16. Mr Patrick O'Flaherty, the financial director of the first named Defendant, gave evidence of two distinct contracts.

17. The first was a contract of May, 1999 in respect of the Galway area which involved a dead network requiring a copper jointer's skills which required less responsibility than working on the existing live network. The first named Defendant employed predominantly Irish copper jointers under this contract which is still ongoing.

18. The second contract of the 30th September, 1999 related to upgrading and maintaining the existing "live" network in Dublin. Eircom Plc ("Eircom") had told Mr O'Flaherty that 250 workers would be needed and the first named Defendant stated that they could supply 80. That contract was based on the general conditions of the May, 1999 contract but with a difference of the basis of payment and an accreditation course. 70 were employed as copper jointers in Dublin; 6 went to Galway and 4 to Athlone because of the demand there. The worksheets were completed by the first named Defendant and signed by an Eircom supervisor. Mr O'Flaherty stated that the funding for the contract of the 30th September came out of capital which was a separate budget in respect of the Dublin contract with Eircom.

19. On the 23rd December, 1999 Eircom had overpaid on that budget. The first named Defendant offered to postpone receiving payment until April. However, this was refused by Eircom. Mr O'Flaherty told the Plaintiffs who then commenced these proceedings. He tried to get work for them in Eircom. There was no resumption of the work in Dublin. He said that the first named Plaintiff never had any intention of taking the Plaintiffs other than for the work with Eircom. He had assumed that the work was secure until March, 2000. However, work was no longer available. He was able to secure some employment with British Telecom in London, Northern Ireland and in Ireland.

20. Under cross-examination Mr O'Flaherty agreed that the contract with Eircom of May, 1999 gave no entitlement to any particular level of work. He did not have any dealings with the advertising in South Africa. He agreed that the recruitment of 70 in South Africa proceeded before the written memo of the 30th September, 1999 was executed with Eircom. While there was no form of commitment from Eircom he did not feel it improper to rely on Eircom and felt able to make a judgment call.

21. He agreed that the general agreement, at paragraph 2.1, provided that work should be "allocated as the need arises". The notification of the requirement was received orally in August, 1999 according to his recollection. The figure of 80 followed on his colleague Mr Hartnett visiting South Africa in September, 1999 to recruit copper jointers. He did not agree that the terms offered to the intending workers was prior to a commitment from Eircom. That commitment was verbal that they needed 250 and that the Defendants would provide 80.

22. He agreed that the contract letters dated the 17th September, 1999 to the Plaintiffs offered secure employment conditional on their being available in Dublin on the 29th October, 1999 and having a work permit. Mr O'Flaherty said that his company had been advised that the need was there and that there was no necessity to make the contracts conditional on that work being available.

23. It was not the fault of the Defendant companies that Eircom could not provide any other work. Mr O'Flaherty agreed that the letter of 16th November, 1999 from the first named Defendant to Eircom regarding increases of £30 - £34 per hour was sent but denied that it had anything to do with the termination by Eircom. There was no written response to such a request. He agreed that there was less profit on pressurisation work. A letter dated the 5th January, 2000 from Eircom to the first named Defendant referred to a complaint in relation to the Dublin contract was received by all contractors. He attended a meeting on the 15th March, 2000 to discuss the concerns of Eircom and a discount for the amount charged on work. There was no prospect of new work. However, under "Tender 2000" he expected that Eircom would have additional work which will involve the Access Network Programme. He understood that the Defendant company would be given different work under that programme.

24. He said he was in South Africa in March, 2000.

25. The Plaintiffs were told that there would be recommencement of work not under the September agreement but under the "Access Network Programme 2000".

26. In relation to the letter of the 23rd March, 2000 Mr Hartnett to Mr Foy of Eircom he agreed that the reference to failure of project to deliver related to Eircom's contention that there was a failure. The letter of the 5th January, 2000 evidenced the unhappiness of Eircom prior to the ending of the contract on the 7th January, 2000. Mr O'Flaherty disputed the fact that there was a failure. There had been a problem regarding a shortage of tools and equipment. However, at a meeting on the 22nd November, 1999 assurances were given that the employees would be looked after.

27. Mr Martin Cooper, head of Regulation and Costing of Eircom and head of Outsourcing in May, 1999 referred to the contract for the Galway work in May, 1999 and to the September, 1999 contract for the Dublin region which was black spot and pressurisation work.

28. He agreed that the memo of the 30th September, 1999 relating to a meeting between the first named Defendant and Eircom put in writing some of the discussion. He would not describe it as a contract document but as a reflection of what was discussed. He agreed that the Galway project was primarily a capital budget expenditure as was the Dublin pressurisation project. However, the black spot element of the work was a current budget expenditure.

29. He also agreed that the accreditation course for Dublin was one day longer than that for Galway.

30. The work slowed down before Christmas and no further work was given to the first named Defendant after Christmas. From the 7th January, 2000 only authorised work would be paid for. There was no performance issue - the letter of the 5th January was not the reason that they did not get work as there was no work for other contractors.

31. The 2000 contract was mainly general work in respect of new contracts.

32. On cross-examination Mr Cooper agreed that the memo of the 30th September, 1999 was not a contract but gave an indication that there was work. There was no contractual commitment by Eircom. He could not say if there would be more work after Christmas.

33. Mr Brian Hartnett, Operating Director of the Defendant companies was involved in the tendering process. He was asked by Eircom how many technicians could the Defendant company provide and he agreed to provide them with 70.

34. On the 31st August, 1999 he went to South Africa and sent letter to prospective employees with draft terms and conditions. Confirmation would be received once they came to Dublin Airport and presented themselves. There were taken in batches. They had to undergo accreditation process here. They were paid £10 per hour on the course and £14 per hour when working. A unit rate rather than an hourly rate applied to payments by Eircom to the Defendant companies.

35. On the 21st December, 1999 Mr Cooper rang Mr Declan Kelly the fourth named Defendant and indicated that the network upgrade was to stop. The Plaintiffs were informed on the 5th January, 2000 informally and on the 11th January, 2000 formally.

36. On cross-examination Mr Hartnett agreed that the dates for the ads were either August or September, 1999. He believed that the contracts were to run from six months to one year but that there were indications that overtime would be available. He saw the letter of the 27th September, 1999 from Mr O'Flaherty referring to one year renewable. He was assured by Eircom that they would have work until March. Until the tendering process at present is complete the Defendant will not know how many they will need. He said he did not know whether the Defendant was currently advertising for cable jointers in the United Kingdom.

37. Mr Raymond Kelly, the third named Defendant, went to the South African agencies who indicated that they could supply 50 people. There was a verbal agreement with Eircom. The agencies advertised in South Africa as this was their responsibility.

38. Mr Kelly agreed that they believed that Eircom intended to upgrade all exchanges and that they made a commercial judgment accordingly. However, the agency did not act in the absence of a commitment. The agency wished to indicate in the advertisements that the contract was as long as possible but that he had limited contracts to one year as in the memo of the 16th September, 1999.

39. Mr Martin Cooper's memo to Mr Kelly of the 9th March, 1999 referred to a relationship with fewer contractors. Mr Kelly believed that there was ample work from Eircom. He stressed that he tried to develop long term relationships rather than entering into litigation.

40. Four witnesses gave evidence for the Plaintiffs: Mr Schneeberger (forty first named Plaintiff); Mr Witter (fifty third named Plaintiff); Mr Bezuidenhout (nineteenth named Plaintiff) and Mr Neveling (thirteenth named Plaintiff). All four had left permanent employment. All were given assurances of work of one year and would not have considered a six month contract. They all had signed a letter dated 27th September, 1999 with the agency and left those letters at the agency taking a signed copy with them.


SUBMISSIONS ON BEHALF OF THE PLAINTIFFS

41. The Plaintiffs contend that the advertisements placed by the South African employment companies referred to a guaranteed minimum period of one year renewable in addition to other terms.

42. The conditions of contract dated the 27th September, 1999 emphasise that the offer was conditional upon the Plaintiffs being available for work in Dublin on the 29th October, 1999 and not being refused a work permit. The letter also dealt specifically with the issue of termination of contract as follows:


"This contract can be terminated by yourself by giving one month's notice at any time. This contract can be terminated by Kelly Technical Services in the event you do not pass the Eircom accreditation within three attempts. This contract can be terminated by Kelly Technical Services with immediate effect for unsatisfactory performance of your duties, primarily if you fail to develop a good working relationship with the Eircom staff with you come into contact with or with your supervisors at Kelly Technical Services."

43. The Plaintiff say that there was no suggestion that the contracts of employment would be terminated should the Defendants not have any further work from Eircom. The Defendants argue that the contracts with the Plaintiffs had been frustrated because "they lost the Eircom contract". Nowhere in the contract entered into between the parties is there any reference to the contracts being dependant and/or conditional upon the Defendants continuing to conduct work on the part of Eircom.

44. The Plaintiffs made considerable sacrifices in accepting the offer. They would not have accepted an offer of employment for less than twelve months. A number of Plaintiffs brought their families with them.

45. In January, 2000 the Plaintiffs were advised by the Defendants to return to South Africa and were informed there was no further work available. It was only when the Plaintiffs issued proceedings against the Defendants on the 13th January, 2000 that the Defendants gave undertakings to the Court that they would continue to pay the Plaintiffs the agreed contractual salary and, further, that they would continue to provide or seek to provide employment for the Plaintiffs.

46. The Plaintiffs submit that the theoretical basis for the doctrine of frustration is disputed. There are contradictory Irish authorities providing alternative explanations as between the implied contract theory and/or the true construction theory ( Cummins -v- Stewart (No 2) 1913] IR 95 and Mulligan -v- Browne (High Court, Kenny J. unreported, 9th July, 1976)).

47. Notwithstanding the uncertainty as to its theoretical basis, the doctrine itself is straightforward. A contract may be discharged on the grounds of frustration when something occurs after the formation of the contract which renders it impossible to fulfil the contract or transforms the obligation to perform into a radically different obligation from that undertaken at the moment of entry into the contract. The doctrine is subject to the limitation that the frustrating circumstances must arise without fault of either party ( Maritime National Fish Limited -v- Ocean Trawlers [1935] AC 5 24 and Constantine Lion -v- Imperial Smelting Corporation [1941] 2 All ER 165.

48. The Plaintiffs submit that the doctrine of frustration can never be applied in order to discharge a party to a contract from performing its contractual obligations in circumstances where it may be extremely difficult or even impossible to do so. In Leeson -v- North Bristol Oil and Candle Limited [1974] 8 IR CL 309, it was held that the fact that the Defendants could not obtain paraffin from their own supplier because of a strike did not excuse their failure to supply the Plaintiff. In Paradine -v- Jane [1647] Aleyn 26, the Plaintiff had let lands to the Defendant under the terms of a lease which required the lessee to pay rent on a quarterly basis. The lessees were ejected from possession by armed force, the lands then being occupied by the military during the English Civil War. In an action for arrears of rent, the lessee pleaded that the circumstances excused non-payment of rent. However, this plea was rejected and a distinction was drawn between a general duty imposed by law upon a lessee and a duty undertaken by way of contract. In respect of duty taken on by way of contract the Court stated that:


"When the party by his own conduct creates a duty or a charge upon himself he is bound to make it good, if he may, notwithstanding any accident by inevitable necessity because he might have provided against it by his contract."

49. The Plaintiff submits that the Defendants could have included the term in this contract specifically dealing with the situation which would arise if the Eircom work was no longer available. They did not do so under the section dealing with termination of contract. However, if such a term had been included the Plaintiffs would not have accepted such a precarious and unguaranteed offer of employment.

50. Besides the requirement in relation to provision against a third party not providing work, an element of mutuality is necessary.

51. The advertisements and the letter of offer and letter containing the contract did not expressly or impliedly provide that the agreement would be terminated should Eircom work not be available.

52. The fact that the Defendants had been able to provide work for 39 of the Plaintiffs who remained in Ireland disproves the contention that the contracts of employment entered into could not be fulfilled should the Eircom work no longer be available.

53. The Plaintiffs submit that the Courts do not allow the doctrine of frustration to apply where increased costs or a limited amount of work make it impossible for one party to perform the contract without incurring serious financial losses and refer to Clarke: Contract Law in Ireland, 3rd Edition, 425:


"It would be undesirable for a business man to agree to perform a contract for a fixed amount and permit him to seek relief through the doctrine of frustration if, during performance, unanticipated difficulties arise."

54. Reference was also made to Revell -v- Hussey [1813] 2 Ball and B 280 and Davis Contractors -v- Fareham UDC [1956] AC 696.

55. The Plaintiffs contend that the cessation of Eircom work was not unforeseen or unexpected and referred to paragraph 2.1 of the contract whereby work would be allocated "as the need arises" by the head of outsourcing or his duly authorised representative. Moreover, paragraph 2.2 provides a forecast and projection of work that would be required on the "best estimates of anticipated demand for the services as required and are therefore provided for information only and no commitment as to the level of business eventually awarded during the term of the contract is to be inferred, either in its entirety or the relative size or category of work".


56. Counsel for the Plaintiffs also referred to Neville & Sons Limited -v- Guardian Builders Limited [1995] 1 ILRM 1 where the Supreme Court held that frustration of a contract takes place when a supervening event occurs without the default of either party and for which the contract makes no sufficient provision. The event must so significantly change the nature of the outstanding contractual rights and obligations from what the parties could reasonably have contemplated at the time of the contract's execution that it would be unjust to hold them to its terms in the new circumstances.

57. The Plaintiffs submit that the failure of Eircom to continue to provide work has not significantly changed the contractual rights entered into by the parties who remain employees of the Defendants. Some are continuing to work while others are available for work. They say that the Defendants do not wish to continue paying the Plaintiffs money for work which is not as abundant as they thought would be the case. Frustration in this circumstance would provide an alternative to redundancy in which an employer would no liability or responsibility to the employee.



SUBMISSIONS ON BEHALF OF THE DEFENDANTS.

58. The Defendants submit that no contractual obligations arose on the part of the last two named Defendants. Any contract with the Plaintiffs arose from the first or second named Defendant against whom any liability which attaches in the present claim arises. I would agree with this submission.

59. The Defendants submitted that a small number of the Plaintiffs have, in fact, resigned from employment with the Defendants and have therefore terminated their contracts with the Defendants. As to the balance of the Plaintiffs the issue is whether the contract between the first and/or second named Defendants and the Plaintiffs was effectively discharged by virtue of frustration of the contract.

60. The Defendants case is that at all material times the contracting of the Plaintiffs for the carrying out of work on their behalf was in the context of doing work on behalf of Eircom Plc; and when Eircom indicated to the Defendants in late December 1999 that no further work was available for the first named Defendants to carry out, the contract was effectively terminated from that point onwards. The contracts commenced with a written contract document on the 27th September 1999 and the Plaintiffs were paid appropriate remuneration and expenses during the currency of that contract and appropriate remuneration and expenses on the termination of the contract by virtue of the withdrawal of the availability of work by Eircom on the aspect of the project on which the first named Defendants were working.

61. The Defendants submit that the relevant law as stated in Halsbury's Laws of England (4th Edition, Vol 9 at par. 450) is as follows:-


"It frequently happens that a contract is silent as to the position of the parties in the event of performance becoming literally impossible or only possible in a very different way from that originally contemplated. In such cases the law excuses further performance under the doctrine of impossibility or frustration. "

62. Counsel for the Defendants referred to the origin of the doctrine in the old case of Taylor -v- Caldwell (1863) 3 B. & S. 826. There a contract for a musical performance was discharged by frustration of the contract when the intended music hall venue was destroyed by fire. Counsel mentioned that while there are a number of academic theories as to the basis of the doctrine, the approach of the Courts to commercial arrangements between parties are more instructive. Where events arise which effectively change the basis for the performing of a contract so that what is in place is a materially different contract from that which is originally envisaged by the parties the Courts will alleviate the harshness of the contractual obligation by treating the original contract as being frustrated if its original purpose and intention cannot be met by virtue of outside circumstances with no wrong on the part of the contracting parties. The opposite extremes of the interpretation of the doctrine are to be found in the "Coronation cases" of Krell. v. Henry (1903) 2 K. B. 740 and Heron Bay Steambot Co . v. Hutton (1903) 2 K. B, 683.

63. It is submitted by the Defendants that the cancellation of the Eircom contract effectively gave rise to a situation analogous to that in Krell where the procession which was to be viewed from particular rooms was no longer to take place rather than in Heron Bay where the hirers had at least the benefit of a trip around the port.

64. The Defendants also referred to Neville .v. Guardian Builders (1990) ILRM 601 and (1995) 1 LLRM 1 , where the Defendants purchased a plot of land for development purposes. The only access to the site was through a narrow road which was inadequate for the purpose of proceeding with the intended development. While the High Court determined that the contract had been discharged by frustration, in the Supreme Court overturned this decision on the facts of the case. Blayney J. determined that the contract, while more onerous on the parties, was not completely discharged by frustration owing to the failure to obtain land from the Local Authority to provide sufficient access for development purposes on to the site.

65. The net position as emerges from the Neville case is as follows (as appears from headnote no. 1 of the High Court Report) and echoes Lord Radcliffe in Davis Contractors -v- Farnham UDC [1956] AC 696 at 778/9:


"A contract will be deemed to be frustrated whenever the law recognises without the default of either party a contractual obligation has become incapable of being performed because the circumstances in which it is called for would render it a thing radically different from that which was undertaken by the contract. "

66. The Defendants say that in the present case Eircom were limited under the terms of their contractual arrangement with the Defendants to terminate the contract only for a stipulated breach. The contract between the Plaintiffs and the Defendants as reflected in the letter of 27th September 1999 and any of the surrounding documents did not provide for a "force majeure": in fact the contracts did not provide as to what had to happen in the event that what apparently was the basis or cornerstone of the contract was to be removed.

67. In the initial advertising for the contract which is sought to be enforced by the Plaintiffs herein it was specifically indicated that work was to be carried out "At a large telecommunications company in Ireland". The document of the 1 7th September 1999 to the Plaintiffs specifically indicated that the offer was for a twelve month contract "Working on ... the Eircom network". The document indicated that Telecom Eireann (as it was then known) was Ireland's national telecommunications company. The document went on specifically to indicate that an orientation course would be required to meet the requirements of Eircom representatives as to sufficiency of competence on the part of the Plaintiffs. These matters were echoed in the letter of the 27th September 1999 which the Plaintiffs contend comprises the contract of obligation on the part of the Defendants. Again reference was made to a twelve month contract working on a particular aspect of the Eircom network (indicating that Eircom is Ireland's national telecommunications company). The document indicated that the contract could be terminated by the Defendants only in the event that the Plaintiffs fail to meet Eircom accreditation within a fixed period of time and specifically also requires that a good working relationship will be needed with the Eircom staff. The work permit available for the Plaintiffs was only for work in Ireland. The only work in Ireland with the Defendants was to work on the Eircom contract. The contract between the Plaintiffs and the Defendants never envisaged the Plaintiffs being paid for not doing any work. Accordingly it is the contention of the Defendants that once their was no work available on the Eircom contract, they had no other work available and the Defendants were not obliged to pay the Plaintiffs for doing no work. All of the present Plaintiffs were required to attend training programmes which were relevant only to the aspect of the Eircom contract which was subsequently cancelled by Eircom. In these circumstances it is the contention of the Defendants that the contract was discharged by frustration and without any wrongdoing or fault on the part of the Defendants.

Applying the Neville criteria to the facts of the present situation Counsel for the Defendants submitted that all of the considerations determined in the Neville case to give rise to an effective application of the doctrine of discharge by frustration were met:-


(a) There was no default on either the part of the Plaintiffs or the Defendants.
(b) The contract has become incapable of being performed. Eircom have ceased requiring the Defendants to carry out the relevant work for them and therefore the Defendants have no work for the Plaintiffs with Eircom or on the relevant aspect of the Eircom network.
(c) What is now involved in continuing with the contractual obligation is to put in place a contract which is radically different from that which was intended between the parties.

68. It was never intended that the Defendants would pay the Plaintiffs for doing no work. The Defendants have no other work for the Plaintiffs in Ireland except on the identified aspect of the Eircom contract. There is no further Eircom work available with the Defendants to be carried out by the Plaintiffs. Any requirement of the Plaintiffs to do work for the Defendants other than in accordance with the Eircom contract has been in the context of seeking to mitigate the Plaintiffs loss and not otherwise. This work (mainly in the U.K.) was not what was envisaged between the Plaintiffs and the Defendants at the inception of the original contract.

69. In the circumstances the Defendants submitted that the contract was discharged by frustration.


Determination

70. The issue before the Court is whether the contracts entered into on the 17th September, 1999 between the second named Defendant (whether on its own behalf or on behalf of the first named Defendant is not material) and the several Plaintiffs was frustrated by the termination of work by Eircom in January, 2000.

71. It is common case that the Plaintiffs were employed by the Defendant companies and not by Eircom nor by the South African agencies.

72. It is significant that the letter of 27th September, 1999 was conditional only on being available for work in Dublin on the 29th October, 1999, or earlier as arranged, and not being refused a work permit by the Department. There was no condition about availability of work. Such a condition could have been inserted as would be provided in an engineering sub-contract and could have been provided for in a carefully drafted contract of employment.

73. The contract would be terminated by the employee on giving one month's notice at any time and could be terminated by the Defendant companies where the employee had not passed the accreditation course within three attempts or had unsatisfactorily performed his duties.

74. There is no evidence of either eventuality. Indeed, it is clear that it is not a matter of termination that is before the Court by of frustration of the contract without fault.

75. I accept that the evidence of complaints by Eircom did not amount to a basis for termination of the contract between Eircom and the Defendant companies.

76. The basis of the doctrine of frustration would appear from the authorities is that there is a supervening event which must be so unexpected and beyond the contemplation of the parties, even as a possibility, that neither party can be said to have accepted the risk of the event taking place when contracting.

77. The clear evidence of Mr O'Flaherty was, while there was no form of commitment from Eircom, he did not feel it improper to rely on Eircom and felt able to make a judgment call.

78. The general agreement of the Defendant companies with Eircom as to work being "allocated as the need arises" points to the possibility of such work not arising. It was certainly not so unexpected as to be beyond the contemplation of the parties, even as a possibility.

79. Mr Raymond Kelly believed that Eircom intended to upgrade all exchanges and that, accordingly, the Defendant companies made a commercial judgement accordingly.

80. The memorandum of the 30th September, 1999 related to a meeting between the first named Defendant and Eircom. Mr Martin Cooper of Eircom did not describe it as a contract document but as a reflection of what was discussed. It seems to me that it was on the basis of this document that the Defendant companies proceeded. Indeed, Mr Cooper agreed that the memo gave an indication that there was work even if there was no contractual commitment. Significantly, however, Mr Hartnett had sent letters to prospective employees with draft terms and conditions before that date.

81. The clear evidence was that, notwithstanding the non-finalisation of the contract with Eircom, the Defendant companies sought to engage technicians on one year contracts.

82. The Defendants were aware in making a commercial judgement call that this was conditional on work being available.

83. The Court must accordingly on a general impression of what the rule in relation to frustration requires. It is for that reason that special importance is necessarily to the occurrence of an unexpected event that, as it were, changes the face of things. It seems to me that this is not the case. It is not hardship or inconvenience or a material loss itself which calls the principles of frustration into play. There must have been such a change in the significance of the obligation that the thing undertaken would, if performed, be a different thing from that contracted for.

84. Moreover, it does not seem to me that the contract had become entirely incapable of being performed. Indeed, the Defendant companies, in order to mitigate loss or damage, have obtained work for some of the workers concerned.

85. Indeed, the very commendable attempt by the Defendant companies to procure such work for the technicians they had employed is to my mind an indication that a contractual relationship survived which would be inconsistent with the contract being frustrated.

86. Moreover, the relationship entered into with the Plaintiffs was one of master and servant, to use the old fashioned term. It seems to me to be inappropriate in that circumstance to apply a strict contract law approach to employment disputes. Attempts to so apply tend to obscure the social implications of certain kinds of conduct or events by reducing them to legalistic principles. However, it is not for this reason alone that I find that the contract was not frustrated in the circumstances.

87. Furthermore, I am satisfied from the evidence given by the four Plaintiffs that they would not have entered into the contracts had there been a condition that the contract could be terminated if work were not available. Those Plaintiffs gave evidence which showed a commitment to coming to Ireland for a period of one year with hope of continuing further in reliance on the first letter of 17th September, 1999 in relation to the renewal of the contract after a period of one year.

88. In the circumstances and for the foregoing reasons it does not seem to me that the contract was frustrated by the loss of the specific Eircom contract.


© 2000 Irish High Court


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