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You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Macari v Celtic Football & Athletic Co Ltd [1999] ScotCS 138 (8 June 1999)
URL: http://www.bailii.org/scot/cases/ScotCS/1999/138.html
Cite as: 1999 GWD 25-1208, [2000] SCLR 209, 2000 SLT 80, [1999] ScotCS 138, 2000 SCLR 209, 1999 SC 628, [1999] IRLR 787

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FIRST DIVISION, INNER HOUSE, COURT OF SESSION

 

Lord President

Lord Caplan

Lord Marnoch

 

 

 

0/309/6/98

 

OPINION OF THE LORD PRESIDENT

 

in

 

RECLAIMING MOTION FOR PURSUER

 

in the cause

 

LUIGI MACARI

Pursuer and Reclaimer;

 

against

 

THE CELTIC FOOTBALL AND ATHLETIC COMPANY LIMITED

Defenders and Respondents:

 

_______

 

 

Act: Sutherland Q.C., Wallace; Balfour & Manson (for Keegan Walker & Co, Livingston) (Pursuer and Reclaimer)

Alt: Clarke Q.C., Bennett; Semple Fraser (Defenders and Respondents)

 

8 June 1999

 

The pursuer, Mr. Luigi Macari, is a former professional football player who has had a subsequent career as a football manager. On 27 October 1993 he and the defenders, Celtic Football and Athletic Company Limited ("Celtic"), entered into a service agreement ("the agreement"), setting out the terms of his employment as manager of Celtic. Clause 2.2 provided:

"The period of notice required to be given, by either party, to terminate the employment of the Manager shall be not less than two years, such notice not to be given during the first year of the employment of the Manager. The Company may elect to make payment in lieu of notice."

It is agreed that, despite this provision, on 14 June of the following year the defenders terminated the pursuer's employment. Not only therefore was the pursuer dismissed within the first year of his employment, but he was given no notice and no payment in lieu of notice. In the present action the pursuer claims that for these and other reasons his dismissal was a breach of Clause 2.2 of the agreement and he sues the defenders for damages for that breach. Broadly put, the defenders' position is that at the time of his dismissal the pursuer was in flagrant material and repudiatory breach of the agreement, that they accepted that repudiation and that his dismissal was accordingly lawful. The Lord Ordinary assoilzied the defenders and the pursuer has reclaimed.

In her opinion the Lord Ordinary gives a vivid account of the events leading up to and surrounding Mr. Macari's dismissal. Both sides accepted her findings in fact, though counsel for the pursuer asked the court to make certain further inferential findings. In those circumstances the notes of evidence were not extended and we know nothing of the evidence or of the circumstances apart from what is set out in the Lord Ordinary's opinion, in the agreement and in a handful of letters which were copied for our use. In referring to the relevant facts and evidence, for the most part I have gratefully paraphrased the opinion of the Lord Ordinary.

At the time when the pursuer took over as manager towards the end of October 1993 the fortunes of Celtic, both financial and sporting, were at a low ebb. On 3 March of the following year a consortium of investors headed by Mr. Fergus McCann mounted a successful take-over bid for Celtic. The former board of directors were replaced by a new board and Mr. McCann, who injected a substantial amount of capital by way of a rights issue, became the managing director. He was a man who had enjoyed a successful career as an international business man but had long entertained the ambition of gaining control of Celtic. He felt that the club was lacking in marketing and general management capability and would benefit from his financial expertise and commercial skills. Perhaps predictably, Mr. McCann's approach was wholly different from the one followed by the previous board of directors. In particular the old board had adopted a somewhat laissez-faire attitude to management, exemplified by their perception that the manager must be allowed a free hand and be left on his own to get on with his job. While recognising that the manager had a pivotal rôle to play in running the club, Mr. McCann considered that, as managing director or chief executive of the defenders, he himself had both a supervisory and directory rôle in relation to the manager. The pursuer, who had been appointed by the old board and had been given a great deal of freedom to perform his job as he considered best in the interests of the club, was thus confronted with a new situation, one of which he had had no previous experience either at Celtic or at the other clubs where he had been manager. Equally predictably perhaps, the pursuer did not find the new approach to his taste and had difficulty in adjusting to these changed circumstances.

There was, however, a further element in the situation. Mr. McCann and the new board saw the pursuer as a remnant of the old board whose policies, they thought, had led to Celtic's difficulties. So, even before the takeover, Mr. Brian Dempsey, one of the consortium of investors, had advised Mr. McCann that they would need to remove the pursuer and replace him with a new manager. This had been a recurring theme at the investors' meetings and it was carried over into the board after the takeover. At the meeting on 25 March 1994, three weeks after the takeover, Mr. McCann made reference to the pursuer's contract and, in the words of the minute,

"advised that the contract was a particularly onerous and bad contract from the point of view of the Club. He did advise, however, that it was his intention to provide Mr Macari with a warning letter."

The defenders acknowledge that, as the Lord Ordinary specifically found, "Mr. McCann was anxious from the outset to remove [the pursuer] and replace him with a manager of his choice." In the period of just over three months between the takeover and the pursuer's dismissal his relationship with Mr. McCann and the Board deteriorated rapidly. Although Mr. McCann denied this, the Lord Ordinary accepted that the source of the problem was Mr. McCann's desire to remove the pursuer. This finding, which is not challenged by the defenders, lies at the heart of the submissions advanced for the pursuer in the reclaiming motion.

As the minute which I have quoted shows, at the meeting of 25 March Mr. McCann made reference to a warning letter which he was going to send to the pursuer. He sent the letter later that very day and in it he set out a number of issues which "require to be addressed". He added that the letter "is written by me as authorised by and expressing the opinion of the Board of Directors of the Club". It is fair to say that the Lord Ordinary found that several of the criticisms put forward in the letter were not really established or were essentially trivial and it may well be that Mr. McCann and the other directors would have done better not to include them. None the less the letter did highlight two important issues, the pursuer's failure to comply with the residence clause in his contract and the fact that he was frequently absent from Celtic Park. The letter also included a request from Mr. McCann that the pursuer should report to him on a weekly basis. These are all matters which came to be of significance at the proof.

In his pleadings and at the proof, the pursuer contended that the defenders had sacked him in June 1994 simply because they wanted to replace him and that he had done nothing which justified his dismissal. By contrast, the defenders said that they had dismissed him because he had failed to a material extent to discharge his duties as manager, in particular by failing to comply with various directions given to him by Mr. McCann and the board. Transmuting those allegations into legal terms, they contended that by his conduct the pursuer had repudiated the contract and that his dismissal was lawful because it resulted from the defenders accepting that repudiation. The defenders led at the proof and the Lord Ordinary heard a wealth of evidence about the pursuer's alleged breaches of contract. It is not necessary to examine all of those matters in detail. As I have mentioned, the Lord Ordinary rejected some of the allegations, but others she found established.

 

Residence Clause

 

One of the principal battles which the parties fought out before the Lord Ordinary centred on the residence clause in the agreement which is in these terms:

"3.3 The Manager, during the duration of this Contract, shall not, without the written permission of the Board, reside at an address which is outwith the radius of 45 miles from George Square, Glasgow."

Before his appointment the pursuer was living with his wife and family in rented accommodation in Stoke-on-Trent. When he was appointed to Celtic, the pursuer brought some staff with him from Stoke and they were all provided with rooms in the Hilton Hotel in Glasgow and later in rented accommodation. In February 1994 the pursuer took the lease of a house in Bothwell. It had four bedrooms and was large enough for his wife and family, but they did not move into it. Indeed the family home remained in Stoke and the pursuer returned home immediately after the match on Saturdays, sometimes not returning to Celtic Park until the following Wednesday.

The Lord Ordinary interpreted the residence clause as meaning that the pursuer required to have his family home within the specified radius and that interpretation was not challenged before us. It is equally undeniable that at the time of his dismissal, over seven months after the beginning of the agreement, the pursuer's family home remained in Stoke. While, doubtless, the defenders had to allow the pursuer a reasonable time to move his home to the Glasgow area, at the time when he was dismissed the pursuer had not complied with the residence clause. Prima facie therefore he was in breach of this term of the agreement. The Lord Ordinary refers to evidence which she heard to the effect that one purpose at least of a residence requirement of this kind was to ensure that the manager would live within a relatively short distance of the club so as to be readily accessible to the club's premises. Mr. John McGinn, who was a member of both the old and new boards, made the point that it was very difficult to manage a football club from a distance. Again, the pursuer accepted that he was not actually at Celtic Park on a daily basis and the Lord Ordinary held that one factor affecting the amount of time which he spent in Glasgow was the fact that he continued to live in Stoke. In that situation the residence term was important and the pursuer's breach of the clause was no mere technicality, but was contributing to an unsatisfactory situation where he was absent from Celtic Park for much of the week. Looking simply at the clause and the pursuer's failure to move his home to Glasgow, I am satisfied that prima facie he was in material breach of his contract with the defenders at the time of his dismissal.

In fact, of course, there were other elements in the picture. The old board put no pressure on the pursuer to comply with the residence clause. It was contended very faintly at one point in the argument before us that they might thus have waived the requirement. I reject any such contention: it was not raised before the Lord Ordinary and it is, in any event, inconsistent with her finding that the old board were content to proceed upon the assumption that the pursuer would move when he had his domestic arrangements sorted out and probably within a matter of months. When Mr. McCann and his colleagues took over, they adopted a very different attitude and, in his letter of 25 March, Mr. McCann referred to concern over the level of the pursuer's commitment to the club and its players and specifically raised the issue of the pursuer's residence:

"Clause 3.3 of your contract requires you to reside within a 45 mile radius of George Square, Glasgow. The reasons for that are obvious. You accepted that requirement on the signature of this contract. Unfortunately, since the commencement of your contract with us you have continued to reside in England. The Board feel that you have been given ample opportunity to find alternative accommodation and comply with this particular clause. You are at this moment in breach of that clause and as such the Board now require that this is remedied not later than 15th April 1994."

The pursuer replied on 29 March in a letter written from the house in Bothwell. He rejected the general criticisms and said:

"In accordance with clause 3.3 of my contract I live at the above address. This is a rented house and you will see from my contract that there is neither a requirement that I purchase a house nor that my family should move to Glasgow."

Despite the terms of that reply, at the proof the pursuer accepted both that he knew perfectly well when he signed the contract that he would, within a period of time, require to move his family home and that it had been his intention to do so at about Easter 1994. Indeed, on the basis of evidence from the pursuer and Mr. McCann the Lord Ordinary held that, even before Mr. McCann wrote to the pursuer on 25 March, the pursuer had actually given an undertaking to Mr. McCann that he would move his home by about Easter 1994 (Easter Sunday being 3 April). The pursuer did not fulfil that undertaking, of course. At the proof he explained this by saying that his wife had changed her mind for reasons connected with the schooling of their youngest son, Jonathan. She herself said that, since they were due to go on holiday to America for six weeks in June, she had thought that it would be better for her son to remain at school in England until then and to start the new session in Scotland in the autumn.

When Mr. McCann again raised the matter with the pursuer in a letter on 10 June, in an undated reply which was faxed to Mr. McCann the pursuer gave the following explanation of the situation:

"The contract between the Club and me provides that I shall not reside at an address which is outwith the radius of 45 miles from George Square. In order to comply with that provision I have acquired a lease of a property at ( ). I reside at that address. My wife and I have not as yet sold our house in England. The state of the property market is such that an early sale at an acceptable price is unlikely. Moreover my children's education demands that their schooling is not unduly and repeatedly disturbed at this particular time. My domestic arrangements in no way impinge upon my ability to perform my duties and responsibilities to the Club to the utmost of my ability in accordance with the terms of my contract."

In fact the pursuer's house in Stoke was rented and the house which he was having difficulty in selling was in Swindon. The Lord Ordinary specifically finds that any difficulty in selling that house had no connexion with the pursuer failing to move his family to Scotland to occupy the house which he had leased in Bothwell. She therefore reaches the inescapable conclusion that the explanation which the pursuer provided in this letter was "at least partially untrue". So far as the pursuer's written responses are concerned, the Lord Ordinary concluded that:

"... Mr. McCann was not only being misled to some extent as to the reasons for the move not having taken place, but also that there was no acknowledgement either of a previous undertaking having been broken or that the matter was by then urgent nor indeed was there any information provided as to when it was expected the move would take place."

Later she refers to the "uncompromising and somewhat defiant tone in these responses" and she rejects, as having "a hollow ring", the plea based on a desire to avoid disrupting Jonathan's schooling, since he was actually being taken off school to go on holiday some five weeks before the end of term. All this leads the Lord Ordinary to her final assessment that on the matter of residence there had been "a wilful and continuing act of [dis]obedience by the employee of a legitimate and reasonable order of the employer."

As I have explained, even without these additional elements, I would have been satisfied that the pursuer's failure to move his home to the Glasgow area was prima facie a material breach of his contract of employment with the defenders. The facts that the pursuer first undertook to move by Easter 1994, then failed to fulfil that undertaking, that he was less than truthful to the managing director about his reasons for not moving and that he was defiant over the matter serve only to reinforce my view that the breach of contract was material. The Lord Ordinary points to the complete absence from any of the pursuer's written responses of any indication of an intention to comply with the managing director's instructions that he should move his home. The whole picture is of the pursuer refusing to acknowledge the need to comply with an important term of his contract and so repudiating the contract. Unless the particular circumstances are such as to take the case outside the normal application of the law of contract, on this basis alone the defenders were entitled to accept that repudiation and to dismiss the pursuer, as they did.

The contention for the pursuer is that there are indeed circumstances which make the case special. Counsel expressed the point in two ways: either Mr. McCann was acting in bad faith in giving instructions to the pursuer or else the defenders were in breach of an implied term of their contract with the pursuer since his conduct, as their managing director, was calculated and likely to destroy or seriously damage the relationship of confidence between the defenders and the pursuer (Malik v. Bank of Credit and Commerce International [1998] AC 20, per Lord Steyn at p. 45). These two aspects underlie the pursuer's case that his failure to comply with various instructions given to him did not amount to a breach of contract on his part.

 

Bad Faith

 

Counsel for the pursuer accepted that, as managing director, Mr. McCann was entitled to give instructions to the pursuer which the pursuer was obliged to obey. They also accepted that, if an employee failed to obey a lawful and legitimate instruction, this constituted a material breach of contract entitling the employer to dismiss him. They contended, however, that if an employer gave an instruction in bad faith the employee was not bound to obey that instruction. Here, they said, Mr. McCann had issued various instructions to the pursuer which would admittedly have been within the normal range of instructions that the pursuer would have been obliged to obey. Mr. McCann did not give those instructions for the purposes of the contract, however, but in order to put pressure on the pursuer, to break him down and so to bring about a situation where the defenders could dismiss him. The Lord Ordinary's approach was flawed because she had not considered this issue of bad faith. This court should do so and the material in the Lord Ordinary's opinion would be enough to allow us to make a finding that Mr. McCann had given the instructions in bad faith.

That submission falls to be rejected for two reasons.

The first reason is that, once the pursuer concedes - as he does - that the instructions which Mr. McCann gave were instructions which he was entitled to give and which the pursuer was bound to obey in terms of his contract with the defenders, then he is in effect conceding that, by failing to carry them out, he was in material breach of contract, irrespective of the motives of Mr. McCann in giving the instructions. The Lord Ordinary so held under reference to Brown v. The Magistrates of Edinburgh 1907 S.C. 256 and I consider that she was correct to do so. She referred to one particular passage in the opinion of Lord Kinnear which I do not find helpful since in it he was actually rejecting the idea of delictal liability. None the less, the opinions of the court as a whole show that, because Brown was employed at the Chief Constable's pleasure, the Chief Constable had power under the contract to dismiss him summarily and, that being so, Brown's allegations of breach of contract were irrelevant, even if in dismissing him the Chief Constable had acted maliciously.

The second reason for rejecting the pursuer's submission is that there is in any event nothing in the evidence or findings as set out in the opinion of the Lord Ordinary which would entitle this court to hold that Mr. McCann gave the relevant instructions in bad faith. In saying this I readily acknowledge that from the outset Mr. McCann and his colleagues on the board wanted to replace the pursuer as manager of the Club. I am quite willing also to infer that they will have been less than disappointed when the defenders eventually dismissed him in June 1994. I am even willing to go as far as to envisage that Mr. McCann may well have done little actively to prevent the pursuer from finding himself in breach of contract - after all, as I explain in a little more detail below, he did nothing to establish any rapport with the pursuer and never discussed their mutual problems with him before reporting them to the board. All that is, however, a far cry from saying that the instructions which Mr. McCann issued were spurious, inspired only by an intention of driving him from his job.

So far as the residence issue is concerned, the Lord Ordinary, who meticulously examined the evidence, concluded that Mr. McCann's attitude was one which he was reasonably entitled to adopt in the circumstances. That finding is not challenged. She also concluded that his instruction to the pursuer to move to a house within the prescribed radius from George Square was not arbitrary but had an acceptable rationale. Nothing in the evidence or findings about Mr. McCann's attitude to the pursuer persuades me that the Lord Ordinary's conclusion was unsound. In particular I am satisfied that, while the managing director was undoubtedly hoping that the pursuer could be replaced sooner rather than later, he was also genuinely of the view that, in the meantime, the pursuer, who was being paid a large salary to manage the club, should attend more often at Celtic Park. Achieving that was an entirely legitimate aim which the instruction about the pursuer's residence was designed to bring about. I see no basis for saying that Mr. McCann had no such aim and that his only purpose was to engineer circumstances in which the pursuer would leave or could be dismissed.

Very much related to the issue of the pursuer's residence was the issue of his absences from Celtic Park. There was ample evidence on which the Lord Ordinary was entitled to conclude that over the period from March to June the pursuer was not as a matter of fact available at Celtic Park on a daily basis and that he spent much of his time in England scouting for new players. Indeed some weeks he did not return from England until the Wednesday. In his letter to the pursuer of 25 March 1994 Mr. McCann issued a direction from the board dealing with this situation:

"No doubt as a result of your continued residence in England, you appear to spend on average only three days a week in Scotland with the team. Clearly, some time requires to be spent away from Glasgow - watching other teams and potential players. The Board take the view that the period you are spending in Glasgow is not consistent with duties as Manager of the Club and they now direct that, with a view to ensuring the proper discharge of your duties under your contract, you attend full time to the performance of those duties."

To this the pursuer replied:

"I work every day of the week on the affairs of Celtic. As you state a great part of my work involves viewing other games just like any other manager. As I have already noted I do not believe there are any grounds for criticising either my work effort or my commitment to the club."

The Lord Ordinary accepted that there could be different views about the way in which a manager should perform his rôle. She also found that the pursuer did indeed go to matches in England with a view to finding new players, who were urgently required to strengthen the team. He genuinely regarded that as his first priority. As I have noted, however, counsel for the pursuer did not dispute that the managing director was entitled to give instructions on the pursuer's attendance at Celtic Park and that, if they were genuine, the pursuer would be bound to comply with them, even if he considered that the job would be better done in another way. Since the pursuer persisted in not attending daily at the club premises, it is plain that he did not comply with the direction contained in Mr. McCann's letter. The letter of 10 June from Mr. McCann to the pursuer shows indeed that he was continuing to absent himself despite Mr. McCann's view that he should usually be on duty on all business days as well as on match days. Referring to a meeting with the pursuer on 8 June Mr. McCann says:

"At our meeting I emphasised several items to you. Most importantly, your presence at Celtic Park regularly, predictably, and full time is an essential part of the job you are engaged to do. A staff of over fifty players, coaches and other people depend upon direction from you, others in the organisation require your input, and I require reporting from you on a regular basis. This is an essential feature of any executive position, football manager or not. This position is fully agreed with by all the members of the board, many of whom have served more years in administration of professional football than you or I.

The question of residence and carrying out your duties is a crucial one in which you are obviously in total disagreement with my position and that of all others who relate to your functions here. Aside from the effect this has on morale, lack of presence and leadership and direction is damaging the performance of the organisation and I hold you responsible for this."

In fact by this time a further major dispute had arisen between the pursuer and Mr. McCann. It turned out that the pursuer had not really intended to go to Celtic Park at any time between leaving for Canada with the team on about 20 May and returning from holiday in America on about 11 July. In addition he had fixed the five-week holiday, incorporating trips to World Cup matches, to start on 14 June, without informing Mr. McCann. The pursuer's refusal in a telephone call from Manchester Airport to obey an instruction to cancel that holiday was the immediate occasion of Mr. McCann's decision to dismiss him.

Again, the contention advanced by counsel for the pursuer was that any instructions issued by Mr. McCann on these matters were given in bad faith. But, in his reply to the letter of 10 June the pursuer reveals a very different attitude:

"It may be that the direction I give to those elements of the Club for which I am responsible is not that which you and certain other members of the Board would give. It is not uncommon for those without professional experience and expertise to criticise the manager. Whilst I acknowledge that your motives are the same as mine - to restore Celtic Football Club to the position as the premier club side in Scotland and a force in European football - I suggest that you let me get on with the job I was employed to do without trying to turn me into something I am not nor ought to be."

So far from challenging Mr. McCann's motives as lacking good faith, the pursuer explicitly acknowledges that Mr. McCann is genuinely trying to promote the welfare of Celtic. In effect, the pursuer is saying that, none the less, when it comes to managing a football club, he knows better than Mr. McCann and other members of the board who lack his own professional experience. He therefore "suggests" that they leave him to do the job, not as they wish, but in his own way - a clear indication that he does not intend to comply with instructions given to him by the managing director and the board.

As the Lord Ordinary points out, Mr. McCann was new to the administration of a football club and Celtic were going through a difficult period. She concluded that in the circumstances it was not unreasonable for Mr. McCann to expect the pursuer to attend more frequently and that he was entitled to take the view that it was important for the morale of the players and others that the manager should actually be present in the club. Given those clear findings and given in particular the terms of the pursuer's own letter written only shortly before his dismissal, in my view there is no basis on which this court could find that the instructions which Mr. McCann gave to the pursuer about attending the club were other than genuine. It is worth noting that in March the instruction was issued in the name of the board: the pursuer does not contend that the board as a whole acted in bad faith. Moreover, I see no reason to doubt that the aim of the instruction was to try to ensure that, for so long as the pursuer did remain manager, he should be at Celtic Park on a regular basis. Again, there is nothing inconsistent in Mr. McCann genuinely trying to achieve that end, while hoping that the pursuer would not be manager for long.

Another issue about which the Lord Ordinary heard evidence was the requirement that the pursuer should report to Mr. McCann. In a postscript to his letter of 25 March, Mr. McCann wrote:

"Reporting: I would appreciate having from you once a week a verbal report on matters in progress, this should be supplemented or replaced by briefing of the Board in general at their regular meetings which will probably be around every two weeks."

To this the pursuer replied "Noted and agreed" but in fact he did not report weekly to Mr. McCann. There was a body of evidence on the basis of which the Lord Ordinary held that the requirement that the pursuer should report orally once a week was reasonable. The Lord Ordinary went on to find that, in the absence of any evidence to suggest that the pursuer made any attempt to approach Mr. McCann to provide such reports, he was in breach of Mr. McCann's reasonable request. Although at one point in his evidence the pursuer asserted that he did not believe that Mr. McCann really wanted to see him, I again see no sufficient basis for holding that the request was made in bad faith; on the contrary, it appears to me that Mr. McCann was just the kind of managing director who would have been anxious to know what the manager was doing and what problems were being encountered or difficulties overcome. That desire would tend to be heightened rather than diminished by his belief that the pursuer was not the correct man for the job.

For all these reasons the pursuer has failed to establish that the instructions which Mr. McCann gave to the pursuer were given in bad faith.

 

Trust and Confidence

 

The alternative approach of counsel for the pursuer relied on the implied term in the pursuer's contract of employment, the existence of which was affirmed by the House of Lords in Malik. Even though the decision of the House of Lords was handed down in June 1997, the Lord Ordinary was not referred to it, but only to some of the earlier cases. So far as the implied obligation of an employer is concerned, the formulation approved by their Lordships is that the employer shall not

"without reasonable and proper cause, conduct itself in a manner calculated and likely to destroy or seriously damage the relationship of confidence and trust between employer and employee." ([1998] A.C. at p. 45)

Lord Steyn recognised that the law also implied a corresponding obligation on the part of the employee, but added that it

"adds little to the employee's implied obligations to serve his employer loyally and not to act contrary to his employer's interests." ([1998] A.C. at p. 46)

In this passage Lord Steyn is reflecting what is said by Mr. Douglas Brodie at the beginning of an article which he cites with approval, "The Heart of the Matter: Mutual Trust and Confidence" (1996) 25 Industrial Law Journal 121. Mr. Brodie comments:

"In so far as the duty of mutual trust and confidence concerns the employee's duties to his employer it adds little to the well established duty of fidelity"

while adding in a footnote

"Some would also make reference to the duty to obey lawful and reasonable orders at this juncture."

Counsel for the defenders accepted that the term imposing obligations on the defenders was implied into the contract of employment, but stressed that the corresponding term was also implied and imposed obligations on the pursuer.

Lord Steyn gives guidance as to the nature of the conduct which will give rise to a breach of the employer's obligation. He quotes Morritt L.J.'s comment in the Court of Appeal in the same case that the obligation

"may be broken not only by an act directed at a particular employee but also by conduct which, when viewed objectively, is likely seriously to damage the relationship of employer and employee" ([1996] I.C.R. 406 at p. 412)

and adds

"That is the correct approach. The motives of the employer cannot be determinative, or even relevant, in judging the employees' claims for damages for breach of the implied obligation. If conduct objectively considered is likely to cause serious damage to the relationship between employer and employee a breach of the implied obligation may arise."

In the present case counsel for the pursuer submitted that, through the actings of their managing director, the defenders had breached the implied term. In many of the cases the emphasis is on the right of an employee, whose employer has breached the term, to leave his employment and sue for damages on the ground of constructive dismissal. In this case, of course, the pursuer did not do that. Nor did he sue for damages for breach of the implied term. Counsel none the less argued that there had been a breach of the term by the defenders and that the breach was relevant: because of it, the pursuer was entitled to withhold performance of obligations which he would otherwise have had to perform. In particular, it was said, he had been entitled to refuse to carry out the various instructions given to him by Mr. McCann; hence his failure to carry them out did not amount to a breach of contract.

As counsel for the defenders submitted, the general term recognised by the House of Lords is likely to manifest itself in more particular implied terms, much in the same way as the general duty of care not to injure an employee spawns a multiplicity of more specific duties in particular circumstances. The present case concerns the contract between a major football club and their manager and, from the evidence which was before the Lord Ordinary, it appears that the manager of such a club could reasonably have expected to attend the regular board meetings of the club. This was the practice with most football club managers and the pursuer indeed attended board meetings while the old board were in charge. He was not invited to any meetings of the board after April 1994, however. The Lord Ordinary also found that

"The managing director made no effort whatsoever to establish any rapport with the pursuer; their first meeting was a brief handshake in the dressing room prior to a game at Perth and thereafter at his next chance encounter with the pursuer, having made no effort to meet him in the intervening period, he informed him tersely that the players 'had little confidence in him as manager', but refused to provide further explanation.

... Before reporting to the Board as to his dissatisfaction with the manager, Mr. McCann made no effort to discuss the various problems with the pursuer, nor did he approach him with any of the complaints he had against him prior to sending out the various warning letters."

Viewed as a whole, the deliberate exclusion of the pursuer from board meetings and this conduct of the managing director do indeed appear to me to have been calculated and likely to cause serious damage to the relationship of confidence and trust between the pursuer, as manager, and the defenders, as his employers. The defenders were therefore in breach of the implied term of trust and confidence.

The contention for the pursuer was that this breach by the defenders went to the heart of the parties' contractual relationship and in effect meant that the defenders were not entitled to insist on the pursuer performing his corresponding duty of loyalty or fidelity to the defenders. The effect of this was said to be that the defenders could not insist on the pursuer obeying the instructions given to him on their behalf and he could choose not to obey such instructions and to do the manager's job in his own way, while receiving his salary and other benefits under the contract.

Where, as here, an employee continues to work despite a breach of the implied term, depending on the circumstances, this may entitle a court to infer that he has waived all or some of his rights against the employer arising out of the breach. The issue of waiver was not explored in the court below and in the circumstances I proceed on the basis, most favourable to the pursuer, that the defenders' was a continuing breach and that the pursuer had not waived his rights arising out of it.

Unquestionably, our law recognises that in certain circumstances a party is entitled to withhold performance of an obligation under a contract when the other party has failed to perform his obligation. The rule is found in many systems, sometimes being referred to as the exceptio non adimpleti contractus. The development and scope of the rule are surveyed by Jansen J.A. by way of background to the decision of the Appellate Division in B.K. Tooling v. Scope Precision Engineering 1979 1 S.A. 391 at pp. 415-419. Although there is therefore no doubt about the existence of the rule, it is considerably harder to define its scope in our law.

The starting point for the rule is the idea, hardly novel or controversial in itself, that in a contract containing mutual obligations, the obligations of the one party can be seen as counterbalancing the obligations of the other. It is but a short step to say that the one party undertakes to perform his obligations on condition that the other party does so too. This in turn leads to the conclusion that one party does not need to perform his obligations where the other party is not performing the obligations on him. Some very general statements to this effect are found in our books - for example, in Erskine's Institute 3.3.86:

"No party in a mutual contract, where the obligations on the parties are the causes of one another, can demand performance from the other, if he himself either cannot or will not perform the counterpart, for the mutual obligations are considered as conditional."

A similar rather sweeping approach is to be found in the opinion of Lord Justice Clerk Moncreiff in Turnbull v. McLean (1874) 1 R. 730 at p. 738:

"I understand the law of Scotland in regard to mutual contracts, to be quite clear - 1st, that the stipulations on either side are the counterparts and the consideration given for each other; 2d, that a failure to perform any material or substantial part of the contract on the part of one will prevent him from suing the other for performance; and, 3d, that where one party has refused or failed to perform his part of the contract in any material respect the other is entitled either to insist for implement, claiming damages for the breach, or to rescind the contract altogether, - except so far as it has been performed."

This statement is in turn used by Gloag, Contract, p. 592 as authority for his own statement to the effect that the normal construction of a contract containing mutual obligations is that one party "obliges himself subject to the implied condition that performance cannot be required from him unless it is given or tendered on the other side."

Such general statements may give rise to few problems in the case of simple contracts involving only a limited number of obligations on either side. They can, however, be difficult to apply in practice to situations arising out of complex contracts containing a wide spread of obligations. This was recognised, in the context of a contract for performance in stages, in Bank of East Asia Ltd. v. Scottish Enterprise 1997 S.L.T. 1213, where the House of Lords re-examined the scope of the rule. General statements, such as those which I have quoted, must now be studied in the light of the qualifications introduced by that decision. An indication of the overall approach adopted by the House is to be found in the comment of Lord Jauncey:

"My Lords, I do not consider that the authorities warrant so broad a proposition as that any material breach by one party to a contract necessarily disentitles him from enforcing any and every obligation due by the other party. In applying the general principles enunciated by Lord Justice Clerk Moncreiff in Turnbull v. McLean regard must be had to the terms of the contract in question."

He went on to refer to a number of cases and then dealt specifically with the three principles enunciated in Turnbull:

"The first one is really applicable to a case where the obligation by A to pay the price is the counterpart of the obligation by B to complete the works or deliver the goods. I do not, however, consider that the Lord Justice Clerk intended to state that each and every obligation by one party to a mutual contract was necessarily and invariably the counterpart of each and every obligation by the other. It must be a matter of circumstances. Thus in a contract to be performed by both sides in stages, the counter obligation and consideration for payment of stage one is the completion of the work for that stage conform to contract. The second principle must, having regard to the first principle, be construed as referring to performance by the other in relation to the part of the contract which the one party has failed to perform, rather than to the whole contract, although in many cases the part will amount to the whole. The third plainly has in contemplation the material part of a contract which the one party has refused to perform and which may be the subject of specific implement."

This authoritative gloss by Lord Jauncey confirms that the law does not regard each and every obligation by one party as being necessarily and invariably the counterpart of every obligation by the other. One has to have regard to the circumstances. Lord Jauncey deduces from this that a material breach by one party of a particular term of a contract does not of itself mean that he cannot require the other party to perform any of his obligations under the contract. Rather, the party in breach cannot insist on the other party performing his obligations in relation to the part of the contract of which the first party is in breach. It is perhaps worth making the point that equally the party not in breach is entitled to withhold performance only for so long as the other party is in breach. That is implicit in what Gloag says in the passage quoted above. See also, for example, B.K. Tooling 1979 1 S.A. at p. 418F-419C.

Lord Jauncey does not spell out the circumstances in which one obligation will fall to be regarded as the counterpart of another. Sometimes, of course, the express terms of the contract will regulate the matter. In other cases it depends on the intention of the parties as gleaned from the terms of the contract. Lord Maclaren said as much long ago in Sivright v. Lightbourne (1890) 17 R. 917 at p. 920:

"The question whether the obligations are conditional with respect to one another, so that nonperformance by the one party entitles the other party to withhold performance of his obligation, is always a question of intention to be determined by the terms of the contract itself, and the surrounding circumstances, which often point to implied terms."

A somewhat similar approach was laid down by Corbett J., as he then was, in ESE Financial Services (Pty) Ltd. v. Cramer 1973 2 S.A. 808 (C) at p. 809D-E:

"For reciprocity to exist there must be such a relationship between the obligation by the one party and that due by the other party as to indicate that one was undertaken in exchange for the performance of the other and, in cases where the obligations are not consecutive, vice versa...."

The parties had entered into a contract under which the plaintiff company was to manage the defendant's portfolio of shares in return for a fee. The company were also to be entitled to a sum in the event of the value of the portfolio appreciating at a rate of more than ten per cent per annum. In defence to a claim for the sum, the defendant pleaded that the company had breached its obligation to exercise skill and judgment in the management of her portfolio. The Cape Provincial Division held that the defence required to be struck out since the necessary reciprocity did not exist between the obligation of the plaintiffs to exercise skill and judgment in managing the portfolio and the defendant's obligation to pay the sum if the shares appreciated at more than the agreed rate.

In the present case I have approached the matter on the basis of the Bank of East Asia. In my view the argument for the pursuer is unsound.

The defenders' breach of the trust and confidence term was a material breach of contract on their part which the pursuer would have been entitled to accept by leaving his employment and suing them for damages. In fact he did not do so: he remained and drew his salary under his contract but failed to comply with the instructions given to him by the managing director. Of course, as the defenders pointed out, the pursuer did not refuse to obey these instructions because he had lost trust or confidence in the defenders. Rather, he deliberately chose not to comply with them, believing that he knew best what was involved in managing a football club and being determined to do it in his own way. In itself that point would not assist the defenders: whatever his reasons, the pursuer would not have been in breach of contract if any breach of the implied term by the defenders meant that they were not entitled to insist on him complying with their instructions.

As his counsel acknowledged, if sound, the argument for the pursuer would have potentially far-reaching consequences. If it were the case that a breach of the implied term of trust and confidence meant that an employee was entitled to ignore his employer's instructions, then it would mean, for instance, that he could continue working and draw his salary but refuse to obey instructions relating to matters of health and safety. The true position seems to me to be that, if an employee is faced with a breach of the trust and confidence term by his employer but chooses to continue to work and draw his salary, he must do the work in accordance with the terms of his contract. That in turn means that, as regards his work, he must obey any lawful and legitimate instructions which his employer gives him. It is in return for such work in conformity with the contract that the employer is obliged to pay the employee his salary under the contract. On the other hand, in no relevant sense can it be said that an employee's obligation to do his work in accordance with the lawful and legitimate instructions of his employer is, in the words of Lord Jauncey, "the counterpart of" his employer's obligation under the implied term. I note en passant that similarly, on the approach of Lord Maclaren in Sivright, the employee's right is not "conditional with respect to" that obligation of his employer. Nor does the employee undertake to work in accordance with his employer's instructions "in exchange for" his employer's performance of his obligation under the implied term (to apply the test in ESE Financial Services). So, where the employee chooses to continue to work under the contract, his employer's breach of the implied term does not entitle the employee to disregard the employer's lawful and legitimate instructions as to his work.

In the present case the pursuer continued to work as manager of the club and to draw the salary for that work. The defenders' managing director gave him instructions about residence, attendance and reporting, all of which were lawful and legitimate and related to his work under the contract. For the reasons which I have given, the pursuer was obliged to comply with those instructions and his persistent failures to do so were not only breaches but material breaches of his contract with the defenders.

In any event, the pursuer had an obligation under a specific term of his contract, rather than by virtue of any instruction, to reside within 45 miles of George Square. When asked what obligation the defenders had breached which was the counter part of this obligation, counsel for the pursuer could refer only to the general implied obligation of trust and confidence. But there is nothing in the residence obligation which relates to that implied obligation, or makes it the counter part of that obligation. Therefore any breach of the implied term would not disable the defenders from insisting that the pursuer should comply with the residence clause.

For all these reasons in June 1994 the pursuer was in material breach of contract by reason of his failure to comply with the residence clause, by reason of his failure to comply with the instruction to attend more regularly at Celtic Park and by reason of his failure to comply with his undertaking to report to Mr. McCann on a weekly basis. Referring to the undated fax sent in reply to Mr. McCann's letter of 10 June, the Lord Ordinary describes the situation in the strongest possible terms:

"It seems to me that by the defiant, contumacious terms of that letter and of his subsequent telephone conversation, the pursuer was indicating that he was not intending to be bound by the directions of his employer and was opposing his lawful authority. I consider that the circumstances were then such, having regard also to his flouting of specific directions in particular in respect of residence, attendance at Celtic Park and the provision of weekly reports, as to entitle the employer to consider his employee's conduct was indicative of an intention not to fulfil his obligations under the contract and as an intimation of a repudiation of it, justifying his dismissal."

Not surprisingly, counsel for the pursuer accepted that, if the general law of contract applied, in that situation the defenders were entitled to dismiss the pursuer. Analysing the matter more formally, under the general law they would be entitled to accept the pursuer's material or repudiatory breach with the result that they would thereafter be released from their obligations to the pursuer under the agreement with him.

 

Clause 13

Counsel contended, however, that the matter was regulated exclusively by the particular terms of the agreement and that the defenders could dismiss the pursuer only under clause 13:

"Dismissal

Notwithstanding any other provisions of this Agreement, the Company shall have power forthwith to determine this Agreement and terminate any employment hereunder by notice in writing to the Manager in the event that in the opinion of the Board any of the following events shall have occurred:

13.1 if the Manager shall become bankrupt or shall compound with his creditors; or

13.2 if the Manager shall culpably or negligently fail to a material extent to discharge his duties or obligations hereunder; or

13.3 if the Manger shall have committed any material breach o[r] repeated breach of the obligations of the Manager in terms of this Agreement;

13.4 if the Manager shall have become addicted to intemperance;

13.5 if the Manager shall have committed any act or acts of gross misconduct[;]

13.6 if the Manager shall commit or have committed any act which brings the Club into disrepute."

Clause 1.1 provides:

"'the Board' shall mean the Directors of the Company present at a Meeting of the Directors ...."

Counsel pointed out, correctly in my view, that the language of the second paragraph of the letter from Mr. McCann on 14 June dismissing the pursuer showed that it had been drawn up with the terms of Clause 13.2 and 13.3 in mind:

"I refer to our telephone conversation this morning with reference to my letter of 10th June.

I confirm that during that telephone conversation you were dismissed as Manager of the Club. It is the opinion of the Board that you have negligently failed to discharge your duties under your Service Agreement with the Club and that you have been in repeated breach of your obligations as Manager."

Moreover, in Answer 3 in the closed record, the defenders themselves aver that they dismissed the pursuer under the provisions of clause 13. It emerged at the proof, however, that no meeting of the board was held before the pursuer was dismissed. Put shortly, the submission for the pursuer was that, before the defenders could dismiss the pursuer under clause 13, the board required to meet and reach an opinion that the pursuer had negligently failed to a material extent to discharge his duties under the contract or that he had been in repeated breach of his obligations as manager in terms of the agreement. Since the board had not met to form the relevant opinion, the precondition for the defenders dismissing the pursuer under clause 13 had not been fulfilled and his dismissal was therefore in breach of contract and unlawful.

In the court below counsel for the defenders argued that, once it was held that the pursuer had repudiated the contract, he was not entitled to pray in aid the contractual provisions of the very contract which he was repudiating. On this basis, and under reference to the speech of Lord Shaw of Dunfermline in Municipal Council of Johannesburg v. D. Stewart & Co. Ltd. 1909 S.C. (H.L.) 53 at p. 56, the Lord Ordinary held that the pursuer could not found on any failure by the defenders to comply with the terms of clause 13. There are many reasons why that particular argument is unsound, not the least being that it was the defenders who invoked clause 13 and said that it applied to the dismissal; the pursuer was fully entitled to respond to that contention by arguing that the defenders had not complied with the terms of the clause. Happily, the defenders did not renew this line of attack before us and I need therefore say no more about it.

Counsel for the pursuer accepted that, subject to a pleading point, the argument based on the defenders' failure to comply with the terms of clause 13 could not avail the pursuer unless that clause was the only method by which the defenders could dismiss him. Counsel also accepted that this would be the case only if clause 13 could be interpreted as excluding the defenders' right under the general law to dismiss the pursuer for material breach of contract. They further accepted that clause 13 could not be interpreted as having that effect if it was properly regarded as a clause conceived in favour of the defenders: on that approach the clause would be supplementing, rather than excluding, the defenders' rights and powers under the general law of contract.

The Lord Ordinary rejected the pursuer's argument and in my view she was right to do so. The starting point is that under the general law of contract the defenders would not be entitled to dismiss the pursuer summarily unless he was actually in material breach of his contract. The matter would ultimately be one for the determination of the courts. Clause 13 alters that position by giving the defenders power to dismiss the pursuer forthwith if "in the opinion of the Board" any of a number of events has occurred. As Mr. Clarke, Q.C., emphasised on behalf of the defenders, the clause shifts the balance dramatically in favour of the defenders by substituting the opinion of their board of directors for the judgment of the courts on a whole range of events. The pursuer could be dismissed, for instance, if "the Board" formed the opinion that he had become bankrupt or compounded with his creditors; or that he had become addicted to intemperance - a remarkably fluid concept - or that he had committed any act which brought the club into disrepute - again, rather a loose test. Scarcely the least obvious sign that this clause was not intended to benefit the pursuer is the fact that under it he could be summarily dismissed without having any right to be heard by the board or to challenge their opinion. Although the courts could, doubtless, review the board's opinion on these matters if it was one which no reasonable board could have reached, the terms of clause 13 significantly added to the defenders' powers under the general law of contract. A contract without clause 13 would have been more favourable to the pursuer than one containing the clause.

Mr. Sutherland, Q.C., for the pursuer argued that, even if the clause as a whole might be seen in that way, the particular requirement that the opinion had to be the opinion of the directors present at a meeting was a protection conceived in favour of the pursuer. Since the significance of the term "the Board" derives from the general definition which applies throughout the contract, one may perhaps wonder whether this particular point was actually in the parties' contemplation when the agreement was concluded. But, in any event, it seems to me artificial to argue that the very words which invest the defenders with sweeping additional powers to dismiss the pursuer were simultaneously conferring a protection on him which demonstrates that clause 13 was intended to be the only means of dismissing him. In substance clause 13 cannot be regarded as doing anything other than increasing the defenders' powers and, that being so, I find no basis for holding that the parties intended that it should exclude the defenders' right to dismiss the pursuer under the general law of contract. In saying this I do not, of course, overlook what was said by this court in Manheath Ltd. v. H.J. Banks & Co. Ltd. 1996 S.C. 42 but counsel for the pursuer did not direct our attention to any other clause in the contract in this case which was inextricably linked with clause 13 and so had the effect of showing that clause 13 was actually conceived in the pursuer's interest.

I merely add that in my view it would be surprising indeed if, as the pursuer's argument implies, the parties had agreed that the defenders should have no power to dismiss the pursuer summarily, however difficult it might be to convene the board, where he had committed some flagrant material breach of contract, say, by assaulting a player or burning down the stadium.

Since clause 13 did not exclude the defenders' right to dismiss the pursuer under the general law of contract, their dismissal of the pursuer was not wrongful if it was lawful under the general law. In this case, of course, we need only consider whether the dismissal was wrongful: we are not concerned with any question of unfair dismissal under the employment legislation. As at 14 June 1994 the pursuer was in material and repudiatory breach of his contract of employment. By sending the letter and telling the pursuer that he was dismissed the defenders' managing director gave the clearest possible indication that the defenders were accepting the breach. Even if the implied reference to clause 13 was inappropriate where the board had not met, that does not affect the position since it is sufficient that the defenders were entitled to accept the pursuer's repudiation of the contract and that the letter amounted to a clear and unequivocal acceptance of that repudiation. I refer to Chitty on Contracts (27th edition) Vol. 1, paragraphs 24-011 and 24-012 where the authorities are conveniently summarised. Nor is it necessary to scrutinise the exact boundaries of the authority of Mr. McCann to dismiss the pursuer. Even supposing for the sake of argument that he had no authority to do it, the defenders took no steps to dissociate themselves from the press notice of the pursuer's dismissal which he promptly issued "on behalf of the Board". Moreover, at the board meeting on 27 June reference was made to the pursuer's dismissal and it is apparent, as the Lord Ordinary held, that no director present expressed opposition or disapproval. Thereafter the defenders proceeded to appoint a new manager. In short, the defenders at all times acted on the basis that they had dismissed the pursuer on 14 June. They thereby showed that they had on any view adopted or ratified his dismissal by their managing director on that date. It is in any event a matter of admission between the parties that the defenders did indeed dismiss the pursuer on 14 June.

Counsel for the pursuer argued that, since the defenders had averred in Answer 3 that they had dismissed the pursuer under the provisions of clause 13, they were precluded from resisting the pursuer's claim on the basis that they had been entitled to dismiss him anyway under the general law of contract and had done so. I consider that argument to be unsound. The proof was before answer as to relevancy and therefore, at the end of the proof, it was open to counsel for both parties to make legal submissions, based on their pleas-in-law, as to the effect of the evidence led. The issue to be decided was whether the defenders had acted in breach of contract in dismissing the pursuer. On behalf of the pursuer, one legal submission to the Lord Ordinary was that, because the defenders had not dismissed the pursuer according to the procedure in clause 13, they had acted in breach of contract. I almost forbear to mention that no such argument is foreshadowed in the pursuer's averments. Under their general plea to the relevancy, the defenders were equally entitled to advance the legal submission that, even if they had not dismissed the pursuer under clause 13, on the evidence as led the dismissal was still lawful in terms of the general law of contract and so they were not in breach. Which is what they did.

 

Conclusion

 

For these reasons the defenders did not breach their contract with the pursuer in dismissing him and the pursuer's action must fail. It is accordingly unnecessary to deal with the separate issue about the quantum of damages which would fall to be awarded if the defenders were in breach. I simply invite your Lordships to refuse the reclaiming motion.

 

FIRST DIVISION, INNER HOUSE, COURT OF SESSION

 

Lord President

Lord Caplan

Lord Marnoch

0/309/6/98

 

OPINION OF LORD CAPLAN

 

in

 

RECLAIMING MOTION FOR PURSUER

 

in the cause

 

LUIGI MACARI

Pursuer and Reclaimer;

 

against

 

THE CELTIC FOOTBALL AND ATHLETIC COMPANY LIMITED

Defenders and Respondents:

 

_______

 

 

Act: Sutherland Q.C., Wallace; Balfour & Manson (for Keegan Walker & Co, Livingston) (Pursuer and Reclaimer)

Alt: Clarke Q.C., Bennett; Semple Fraser (Defenders and Respondents)

 

 

8 June 1999

 

I agree with your Lordship in the chair.

In presenting the reclaiming motion senior counsel for the pursuer relied essentially on two main points to justify the contention that the defenders had not proved that they were entitled to bring the pursuer's contract to a premature termination. The first was that the Lord Ordinary had erred in holding that the actings of the pursuer, which she had held to be a repudiation of his contract, justified his dismissal as Football Team Manager. She had held that the pursuer had breached his contract in a number of ways. He had failed to honour the specific obligation in clause 3.3 of the Service Agreement to live within 45 miles of the centre of Glasgow. Moreover he had failed, indeed refused, to honour his contractual obligation as an employee to follow the reasonable and lawful instructions of his employers. When Mr McCann had written to him emphasising that the Board were insisting upon compliance with the undertaking, which the pursuer himself had given, that he would move to Glasgow at Easter 1994, he wilfully refused to remove as promised. Further he failed to honour an undertaking to report regularly in respect of football matters in progress. He had been asked to arrange his affairs so that he would normally be in daily attendance at Celtic Park but he ignored this request. Moreover he arranged to take an extended holiday in the United States during the close season and when Mr McCann asked him to modify these arrangements, because during a transitional period of team re-building it was not appropriate that he should absent himself from Glasgow for the period proposed, he ignored the instructions he had received. Indeed it was when he telephoned Mr McCann from Manchester Airport on 14th June 1994, acquainting him with the fact that he and his family were on their way to the United States to take their proposed holiday that matters came to a head. As a result the pursuer was summarily dismissed.

However the Lord Ordinary also found in fact, that there were aspects of Mr McCann's conduct which might well have seriously disturbed the pursuer. From the beginning the relationship between Mr McCann and the pursuer appeared to have been unsatisfactory. The pursuer claimed before the Lord Ordinary that the source of the problem was that Mr McCann was from the outset anxious to remove him. She sets out that Mr McCann denied this but that she preferred the pursuer's evidence on this point. Indeed in her opinion she analyses certain evidence which led her to the view that from an early stage discussions were taking place, at which Mr McCann was present, and at which some of the incoming investors were representing that the Football Manager would require to be replaced. From an early stage Mr McCann was consulting his solicitor about the terms of the pursuer's contract. On 25 March 1994 he informed his fellow directors that the contract was "a particularly onerous and bad contract from the point of view of the Club". On the same date a warning letter was sent to the pursuer by Mr McCann and the Lord Ordinary thought that the sending of that letter was linked to the earlier discussion at the board meeting to which I have referred. Mr McCann made no effort to establish any rapport with the pursuer. On one occasion he informed him that the players had "little confidence in him as manager". Mr McCann also made no effort to discuss complaints or problems with the pursuer and only invited him to one board meeting. From these and other circumstances the Lord Ordinary concluded that Mr McCann would clearly have preferred to have a manager of his choice rather than one who had been appointed by the former Board. However the Lord Ordinary in effect held that, whatever the motives of Mr McCann, the pursuer's actings in relation to the obligations of his employment had to be judged objectively.

It was contended for the pursuer that the Lord Ordinary could not properly find that the pursuer's conduct amounted to breach of contract without having regard to the behaviour of Mr McCann and its effect on the pursuer's contractual obligations. In presenting this argument the Counsel for the pursuer fluctuated somewhat in their description of what the Lord Ordinary failed to consider. The suggestion was that the Lord Ordinary had failed to consider "motive" or "bad faith on the part of the defenders", or the defenders' "breach of a contractual term". However this branch of their case seemed very much to hinge around the case of Malik v BCCI [1998] AC 20. This being a recent case had not been cited to the Lord Ordinary (although two cases which preceded Malik , namely Woods v W.M. Car Services (Peterborough) Ltd [1982] I.C.R. 693 and Courtaulds Northern Textiles Ltd v Andrew [1979] I.R.L.R. 84) were before her). Malik placed beyond doubt the existence of an implied term in a contract of employment (such as I am considering in this case). Indeed corresponding terms impose reciprocal obligations on both employer and employee. The implied term binding the employer has been expressed slightly differently by different judges but I am happy to follow the formulation which seems to have found favour with Lord Steyn at p45 of Malik. This is that the employer shall not "without reasonable and proper cause, conduct itself in a manner calculated and likely to destroy or seriously damage the relationship of confidence and trust between employer and employee". What I have quoted is, of course, the general formulation of the obligation which would require to be amplified more specifically to meet particular situations. It was contended that it was an unavoidable inference from the Lord Ordinary's findings that the defenders had been in breach of this obligation. In any event the Lord Ordinary ought to have applied her mind to the matter. The attitude and actings of Mr McCann were apt to destroy the trust and confidence of an employee in the position of the pursuer. If the defenders were in breach of their contractual obligations to the pursuer then they could not demand from him performance of his obligations. Actings in bad faith were of course calculated to destroy the trust and confidence of an employee and would represent a breach of contract by the employers.

The second attack by the defenders on the validity of the pursuer's dismissal was based on the submission that the defenders both in their letter of dismissal of 14 June 1994, and in their pleadings, had relied on the assertion that the pursuer had been dismissed in terms of clause 13 of the Service Agreement. That clause specifically required that dismissal should follow upon the directors, attending at a meeting of directors, coming to the opinion that one or other of the specified descriptions of conduct justifying dismissal was applicable. The defenders' directors had never held a meeting and thus formed an effective opinion to dismiss the pursuer. It follows that the pursuer's dismissal was not in accordance with the terms of clause 13 and accordingly was invalid. The defenders had founded their whole case on the their averment that the pursuer had been dismissed in accordance with the terms of clause 13. They had never pleaded a case that they had dismissed the pursuer in terms of their contractual rights under the general law of contract. The dismissal letter itself purported to follow upon a clause 13 dismissal.

The approach taken by the Lord Ordinary in deciding the case was basically very straightforward. The pursuer was in fundamental breach of contract. He had wilfully refused to carry out the employers' instructions. Moreover after the employer had brought to his attention that they were expecting him to observe the residential provision in his contract, he breached his contract by failing to remove within a reasonable time (indeed a time which he himself had suggested). The pursuer's breaches of contract clearly go to the root of a contract of employment and the defenders were entitled to treat his conduct as being a repudiation of the contract. They were thus entitled to accept the repudiation as terminating the contract provided that they indicated that acceptance in clear and unequivocal terms. This is what they did. They brought the contract to an end by dismissing the pursuer and obviously he was well aware of what they had done.

The breach of an employee's duty to follow his employer's instructions, and breach of contract by an employer in relation to what I may call the Malik implied term, may have a measure of inter-connection but the incidents of each breach still require to be considered individually. The employee has a duty to accept the directions of the employer, if such directions are not illegal, are within the scope of the employment and are reasonable. Thus to take an extreme example if the managing director had ordered the Football Manager to polish the players' boots this would not have been within the scope of the Manager's employment. Indeed if he had ordered the pursuer to reside for an extended period outside Scotland that would not have been an enforceable instruction because it would have violated clause 3.2 of the Service Agreement. Moreover the instruction must be reasonable and not result in undue exploitation of the employee. A direction that the employee perform work that would result in him working 48 hours without sleep may not be reasonable. However, these qualifications to the validity of an employer's directions must be assessed objectively. The employee cannot know the subjective processes of the employer. Nor can the employee challenge any instruction given to him simply because his own view is that something different to that required by the employer should be done. It is the employer's responsibility to determine how the business should be run. Thus if the employer issues an instruction which in the circumstances can be said to be within the scope of the employee's employment, and which he can reasonably be expected to comply with, then, in my view the employer's subjective thoughts about the matter are not relevant. The employee must carry out a reasonable instruction connected with his responsibilities.

A separate question may arise if it can be shown, not only that the employer was ill-disposed to the employee, but that an instruction was issued to the employee in bad faith to the degree that it was manifest that the instruction had not been issued with a genuine desire to avail the employer of the employee's services under the contract of employment but rather to embarrass or harm the employee. An example of this kind of thing might arise if the employer were to order the employee to make an arduous and unpleasant journey to see a customer, knowing full well that the customer was not available because he had gone abroad for a period. Such actings mala fide would I think amount to a breach of contract in that it would breach the implied Malik condition. However looking to the legitimacy of the instruction it is possible that such an order may also justify the employee in ignoring what he was asked to do, on the basis that it is not within the scope of the employee's employment to carry out instructions not truly connected with his proper function; nor for that matter instructions which are fundamentally unreasonable. A breach of contract would of course entitle the employee to certain remedies whereas directions which were unreasonable or contrary to scope of employment would simply excuse him from the consequences of not following them.

Thus when faced with the submission that the pursuer was in breach of contract because he failed or refused to follow instructions the Lord Ordinary, in the first instance, required to ask herself if such were legal, reasonable and consistent with the pursuer's duties under the contract of employment.

In fact the Lord Ordinary dealt comprehensively with the question of the reasonableness of what the pursuer had been asked to do and also the relevance of his instructions to the responsibilities of his employment. She found that the instructions which form the substance of the defenders' case of repudiation of the contract by the pursuer were all reasonable requirements, and well within the scope of the pursuer's employment. The Lord Ordinary found that Mr McCann was anxious to see the back of the pursuer but she certainly did not find that, in relation to the instructions that matter in the case, there was any demonstration of bad faith on the part of Mr McCann. Indeed, if Mr McCann was anxious to replace the pursuer, it was partly because of his conviction that, the improvements in performance which the repudiated directions were designed to achieve, were essential to the welfare of the Club. There was independent evidence that Mr McCann's views on the residence of the team manager in Glasgow, and the need for his regular presence at the club were perfectly consistent with the general practice of football clubs. Moreover the other board members seem to have supported Mr McCann in his dealings with the pursuer. If they had not approved of his actings before they occurred they ratified them later. There is no suggestion in the Lord Ordinary's opinion, nor in the pleadings, that any of them were acting in bad faith. I consider that in assessing the propriety of the particular directions which the pursuer refused, or in any event failed, to carry out the Lord Ordinary took proper account of all the material that was before her. This means that in relation to the unperformed instructions which led to the pursuer's dismissal the Lord Ordinary could correctly regard the pursuer's conduct as a deliberate departure from performance of the duties of his employment. On no reading of the evidence (insofar as we were acquainted with this) could the Lord Ordinary have found that the particular instructions which the pursuer was said to have ignored were vitiated by bad faith. Thus, unless the pursuer can justify how he behaved as being consistent with other rights under the contract, the defenders were entitled to accept his repudiation of the contract, which they could do by dismissing him.

On behalf of the pursuer it was submitted that even if the pursuer disobeyed legitimate instructions the defenders were not entitled to complain about this because they themselves were in breach of contract. In particular they had breached the Malik implied term. I fully accept that some of Mr McCann's behaviour was such as would be likely to implant in the Football Team Manager a lack of trust and confidence in respect of his employers. Thus, if the pursuer had considered that any legitimate loss of confidence he was experiencing was sufficiently material to affect his capacity to carry out his work, and that this was attributable to the defenders' breach of the Malik term, he might well have been entitled to rescind the contract and claim for damages. It is clear from Malik itself (and from Woods and Courtaulds Northern Textiles Ltd) that a breach of the implied term can be of sufficient materiality to justify rescission of the contract of employment by an affected employee. However, the pursuer did not avail himself of any option to rescind the contract when any actings he may have complained of took place. Instead he opted to work on under his contract. His senior counsel contended before us that, applying the rules about the enforcement of mutual obligations, the employers could not enforce their rights against the pursuer if they themselves had been in breach of contract. This submission would lead to the rather extraordinary result that an employee could elect not to exercise a right to rescind, could work on under his contract, could draw his full salary, and then, at will, could choose what obligations of his employment he would agree to perform. None of the cases we were referred to suggested any remedy for a breach of the Malik type implied term other than rescission or damages. That the employer's breach of the implied term amounts to a repudiation of the contract is understandable since, if an employee was induced to lose his trust and confidence in his employer, this would fundamentally affect his capacity to perform his work, and the breach of contract would have the degree of materiality necessary to support rescission on his part. Nevertheless the employee might instead exercise his right to work on and recover damages, if he had incurred loss. Nor do I see any reason in principle why, in an appropriate case, a breach of the Malik term should not give rise to a right of retention. However, it is quite clear that retention is a remedy with incidents different to those which arise upon rescission. I refer particularly to the analysis by your Lordship in the chair of the case of Bank of East Asia Ltd v Scottish Enterprise 1997 S.L.T. 1213. The retention of performance must be directed at a failure on the part of the other party to perform a counterpart obligation. Moreover for retention to be available there must be a continuing failure to perform the counterpart obligation. No retention arises in respect of a past breach of contract by the other party. If the pursuer felt that his trust and confidence had been so shaken that he could not carry on with his work he had the option of rescinding the contract. On the other hand if he continues to work and draws his salary the counterpart obligation is that he provides the contractual services he is paid for. If an employer commits acts in breach of the Malik implied term then an employee might choose to ignore this and work on. If he does so he signals that he has elected not to exercise any right he may have at that point to rescind, but rather is prepared to tolerate the conditions of work and let the contract continue. Of course circumstances could arise which might revive his right to rescind. The employer may commit further acts in breach of contract or materially aggravate the situation. If the former breach continues the employee may give notice that he is n

In relation to the clause 13 point, like your Lordship in the chair, I see no merit in this. I have no difficulty in concluding that the pursuer's dismissal did not in fact follow upon a proper application of the clause 13 power. The clause confers a machinery whereby, on the basis of a mere opinion that certain irregularities have taken place, the employee can be deprived of valuable rights. A corporate opinion of the directors meeting together is specified as a pre-requisite of the right to give notice of dismissal, and if the defenders want to operate the power under the clause they must employ the procedures prescribed. They cannot unilaterally modify these procedures to suit their own requirements. However, I do not agree that the clause was provided as an exclusive alternative to the ordinary right, arising from the law of contract, to the effect that if one party effectively repudiates the contract, the other party can accept that repudiation and terminate the contract. The relevant clause is obviously an enhancement of the employers' rights. If the employers have reason to believe that one of the specified events has occurred they do not have to tolerate any delay that might ensue before they can prove the default. If they have reasonable grounds for an opinion they can dismiss the pursuer, provided that they follow the necessary procedure. The fact that the advantage conferred by clause 13 is described as a "power" would also suggest that it is directed towards the benefit of the employers, and that it is additional to the rights normally operating in the law of contract. Indeed it seems intrinsically unlikely that the employers would sacrifice their normal right to summarily dismiss an employee in the light of a serious breach of contract that might have urgent implications. Mr McCann's immediate dismissal of the pursuer was no doubt partly prompted by the fact that the pursuer was about to leave for an extended visit to America.

He had, as managing director ostensible authority to dismiss the pursuer and any question of his actual authority was a matter for the Football Club. In any event there was no opposition from the directors to the steps he had taken and they endorsed his actions.

I also consider that there is no merit in the pleading point advanced on behalf of the pursuer. The main defence offered by the defenders was that they had dismissed the pursuer in terms of clause 13. They failed to establish that particular defence. However the pursuer still has to prove his case. Once evidence is led in terms of the protective umbrella of the pleadings the parties are free to suggest what are the legal consequences of the facts proved. As I have said the legal consequences of the facts found to be proved by the Lord Ordinary were that the pursuer had been in fundamental breach of his Service Agreement. It was proved that, following upon the breach, the defenders dismissed the pursuer and there can be no less equivocal response to the pursuer's breach of contract than that albeit that, the precise dismissal procedure had not been correctly specified in the letter of dismissal.

It follows that I agree that the reclaiming motion should be disposed of as proposed by your Lordship in the chair.

 

FIRST DIVISION, INNER HOUSE, COURT OF SESSION

 

Lord President

Lord Caplan

Lord Marnoch

 

 

0/309/6/98

 

OPINION OF LORD MARNOCH

 

in

 

RECLAIMING MOTION FOR PURSUER

 

in the cause

 

LUIGI MACARI

Pursuer and Reclaimer;

 

against

 

THE CELTIC FOOTBALL AND ATHLETIC COMPANY LIMITED

Defenders and Respondents:

 

_______

 

 

Act: Sutherland Q.C., Wallace; Balfour & Manson (for Keegan Walker & Co, Livingston) (Pursuer and Reclaimer)

Alt: Clarke Q.C., Bennett; Semple Fraser (Defenders and Respondents)

 

8 June 1999

 

One of the grounds of appeal in this case has not been contested, namely that the Lord Ordinary was in error in holding that the Pursuer and Reclaimer was debarred from founding on the terms of his Service Contract with the Defenders and, in particular, on the terms of the Dismissal Clause, Clause 13, by reason simply of what the Lord Ordinary held to be his material breach, and thus repudiation, of the contract in question. That, of itself, however, does not get the Reclaimer "home" and, for the rest, the grounds of appeal, as regards the merits, resolved themselves into two main attacks on the reasoning applied by the Lord Ordinary. I deal with each in turn in the same order as that taken by senior counsel for the Reclaimer in the course of his address to this court.

First, it was said that the Lord Ordinary had erred in holding that the Pursuer and Reclaimer had been properly dismissed by a route other than that laid down by Clause 13 of the Service Contract. Your Lordships have already adverted to that Clause in some detail and I do not think it necessary again to set out its terms. Suffice to say that it is a pre-requisite for the operation of that Clause that the "Board" should form an "opinion" on certain matters and, for the reasons already given by your Lordships, I am satisfied that, at least in the absence of special provision in the Articles of the Company (about which we heard nothing), that "opinion" could only be formed at a duly convened meeting of the Board. In that connection, it is common ground that, as matter of fact, there was no discussion by the Board prior to the sending by the Respondents' Managing Director, Mr. McCann, of the "dismissal" letter on 14 June 1994 (No. 27/8 of Process) - which letter, incidentally, clearly reflected the provisions of Clause 13 and referred in terms to "the opinion of the Board". However, there are findings by the Lord Ordinary that after the sending of this letter a statement was issued on behalf of the Board indicating that all members of the Board agreed that the Pursuer's replacement as Manager of the Club was in the Club's best interests and, further, that the Minutes of the subsequent Board meeting held on 27 June 1994 disclosed that reference was made to the, then, recent dismissal of the Pursuer and Reclaimer with no indication of dissent from any of those present. In that situation I confess that I was at first attracted by the notion that, whatever else, the Clause 13 dismissal - for that is what it purported to be - had been adopted by the Board on 27 June but, bearing in mind the absence of pleadings on this matter and, as importantly, that "adoption" usually, and perhaps always, operates as a form of personal bar, I have reached the view that that is not an approach which can, or should, be followed in the present case. That said, if the argument were to run, it might not be without significance that the sending of the letter, No. 27/8 of Process, was clearly within Mr. McCann's ostensible authority and that the letter itself was equally clearly at the time accepted by the Pursuer and Reclaimer as effecting his dismissal under Clause 13 of the contract.

On the assumption, however, that the Pursuer and Reclaimer was not effectively dismissed under Clause 13 the first question which arises for us, as it did for the Lord Ordinary, is whether that Clause falls to be read in the manner contended for on behalf of the Reclaimer, namely as superseding, and to that extent circumscribing, the operation of the general law anent breach of contract and its effects so far as dismissal is concerned. In this connection, the submissions for the Reclaimer undoubtedly get off to a good start by reference to the brocard "expressum facit cessare tacitum". However, that principle only bites where what is expressed is co-extensive in ambit with what would otherwise be implied and it would not be applicable where, for example, the express provision can be seen as conceived solely in the interests of one party to the contract and thus as capable of waiver by him. With these considerations in mind there are several reasons why in my opinion the brocard is inapplicable. In the first place, and as senior counsel for the Reclaimer pointed out, the Clause does not even purport to deal with the rights of parties, as such, but instead confers unilaterally on the company simply a "power" to terminate the Pursuer's employment in the event that in the opinion of the Board one or other or more of certain events have occurred. Secondly, there can be little doubt but that the subjective element inherent in the Clause was designed to operate solely in favour of the Board, and this is particularly so bearing in mind the absence of any provision entitling the Reclaimer to be heard on his own behalf. And, thirdly, it is perhaps not without significance that, if the Clause were to be regarded as exhaustive of the right to dismiss, the Managing Director would himself have no power to act, however extreme the circumstances. As regards the matter of waiver we were referred by senior counsel for the Reclaimer to the case of Manheath Limited v. H.J. Banks & Co. Limited 1996 S.C. 42. However I find nothing in that case to alter my view that Clause 13 could be waived or, rather, ignored at will by the defenders. I would only add that the requirement under Clause 13 for an opinion to be formed by the Board does not strike me as a provision which could operate in the Pursuer's favour in a manner which would otherwise be denied to him. I say that because, in the context of the dismissal of a Manager of a Football Club, I cannot conceive but that, sooner or later, the merits of any dismissal would be considered by the Board which could, if necessary, reverse any earlier decision taken by the Managing Director. In the result, so far as this aspect of the case is concerned, I reach the same conclusion as did the Lord Ordinary, namely that the operation of the general law was not excluded and that in that context the relevant test is whether an employee's actings or breaches of contract, when viewed objectively, are such as to amount to a repudiation of the contract by him.

The question remains, however, whether, even assuming such conduct to be made out in the present case, a so called common law dismissal was effected by the letter, No. 27/8 of Process, as contended for by counsel for the Respondents. The Lord Ordinary did not really consider this question and I am bound to say that it is at this point I, for my part, find the argument advanced by the Respondents to be somewhat artificial. In short, the plain fact, as it seems to me, is that there was no actual dismissal at common law but only a purported dismissal under Clause 13 of the contract. What, then, is the legal result? As it happens the answer, to my mind, was supplied by counsel for the Reclaimer. For, even on their analysis, the letter in question was accepted by the Reclaimer as bringing the contract to an end - as a form of repudiation of the contract by the Respondents or, as I would prefer to put the matter, by way of a constructive dismissal of the Reclaimer. Either way, however, the letter prayed in aid as its justification the earlier alleged breaches of contract on the part of the Reclaimer. In the result, therefore, one is brought back - albeit, perhaps, by a slightly longer route - to what I consider to be the only true issue in the case - at least once it be decided that Clause 13 is not exhaustive - namely, as senior counsel for the Respondents eventually put it, "Do the defenders have a valid defence to the claim that they terminated the contract without notice as required by Clause 2.2 of the contract?". That, in the end, was precisely the issue which was considered and decided by the Lord Ordinary.

Before leaving this branch of the case I do not overlook that counsel for the Pursuer and Reclaimer took the quite separate pleading point, namely that, whatever the merits of the argument just discussed, the Defenders had come into court averring in terms that they had dismissed the Pursuer under Clause 13 of the contract and that it was simply not open to them now to maintain that the dismissal was effected by operation of the general law. If I thought that any prejudice whatsoever had been occasioned to the Pursuer by this change of front I would, myself, be for upholding that objection. As it is, however, I do not see any possible prejudice to the Pursuer and, since the Defenders' pleas-in-law are clearly habile to cover the legal propositions involved, I see no difficulty in giving effect to the submissions as now advanced on behalf of the Defenders and Respondents.

I turn now to the other main aspect of the Reclaimer's argument, namely to the submission that the Lord Ordinary's findings disclosed a clear breach of the Respondents' obligation not to engage in conduct likely to undermine or seriously damage the relationship of confidence and trust which must exist between employer and employee. For reasons which I need not enter into, the Lord Ordinary was of opinion that that obligation was not in point in the present case and, further, that the reasonableness of the instructions given to the Reclaimer as also, no doubt, the materiality of any breach of contract on his part were matters to be judged entirely objectively and without reference to any question of underlying motive on the part of the employer.

Since the Lord Ordinary issued her opinion there has been reported the decision of the House of Lords in the case of Malik v. B.C.C.I. [1998] AC 20 and, in light particularly of that decision, I think it is now clear that the obligation to which I have referred is presumptively present in any contract of service. What is more, I cannot but think that the Lord Ordinary's findings to the effect, as I read them, that the Reclaimer was made aware that the Defenders' Managing Director, Mr. McCann, "was anxious from the outset to remove him and replace him with a manager of his choice" must entail, as matter of law, a breach of that obligation. However, so far as I can see, there are no findings that this breach adversely affected the Reclaimer in any way, let alone that it impacted on the manner in which he, the Reclaimer, carried out his part of the contract. He certainly did not choose to treat the contract as repudiated or to withhold performance of his own obligations. On the contrary, what was suggested on his behalf was that by reason of the Respondents' breach of the implied obligation to which I have referred he, the Reclaimer, could somehow be excused his own breaches of contract while nonetheless continuing in his job as manager. This somewhat novel proposition was said to derive from the principle of mutuality as applied in contract and to be supported by the decisions of the House of Lords in Malik cit. sup. and in Bank of East Asia Limited v. Scottish Enterprise 1997 S.L.T. 1213. In my opinion, however, this proposition is wholly without substance and I find nothing in either of the cases cited which even begins to support it. Indeed, one of the features, if not the most important feature, of Malik is that it was there held possible, in the context of a claim for damages, to found on a breach of the implied obligation when the breach was only discovered after the termination of the Service Contract. There was absolutely no suggestion that the employee or employees concerned could with impunity have breached their own obligations in the interim. In Bank of East Asia Limited v. Scottish Enterprise the House confirmed earlier decisions to the effect that in certain circumstances a contract, and in particular a building contract, could be seen as operating in "stages" with the result that the principle of mutuality could be applied separately to each stage. However, I do not, myself, find anything in that decision which bears on the more normal situation, such as the present, where all the parties' obligations and counter-obligations are, as it were, exigible contemporaneously. In that situation the clear presumption, in my opinion, is that all fall to be construed as inter-dependent and conditional upon each other - Gloag on Contract, 2nd Ed. at pp. 592-595. This is, of course, only a presumption and, as the author points out towards the end of the passage referred to, it can be overcome by parties making clear their intention that certain obligations and counter-obligations can be looked at independently. That said, I can see no reason whatsoever for holding that in the present case the various obligations breached by the Reclaimer were in some way intended as the specific and limited counterpart or quid pro quo of the implied obligation anent the maintenance of trust and confidence. Indeed, so basic and all pervading is the latter that I would, myself, be surprised if a breach could ever be seen as having only some limited effect as opposed to striking at the very root of the contractual relationship. In the result, I am of opinion that, while the Reclaimer might well have been entitled at an early stage to rescind the contract, the only basis on which he could proceed with it was by performing in full his own obligations. It follows that I am against the Reclaimer on the matter of excusal of his own

As to this last matter there may, I think, be a separate question as to whether, in appraising the evidence anent the fact and/or materiality of the various breaches of contract said to have been committed by the Reclaimer, the Lord Ordinary was correct in seemingly leaving out of account Mr. McCann's motivation in wanting to be rid of the Reclaimer from the outset. It is no doubt correct that the motive of an employer in dismissing an employee is, as such, irrelevant but in my opinion this cannot mean that in assessing the evidence anent the validity of that dismissal - both as regards reasonableness of instructions and materiality of breach - the judge should put out of his or her mind any relevant background circumstances including, in this instance, the underlying motivation attributed by the Lord Ordinary to Mr. McCann. According to senior counsel for the Reclaimer this meant that all the Lord Ordinary's findings on these matters were fatally flawed and should simply be ignored with the result that, since the onus of proof was on the Defenders, the Reclaiming Motion should succeed. In my opinion, however, where, as here, the Notes of Evidence have not been extended that is not a course open to us and we must simply do the best we can with the findings as they stand. On that matter I gratefully adopt everything which has been said by your Lordship in the chair. It follows that, in my opinion, this Reclaiming Motion should be refused

 


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