[Unlawful Dismissal] Sinclair v Neighbour

The plaintiff was employed by the defendant, a bookmaker and the proprietor of betting shops, as the manager of one of the defendant’s betting shops at a salary of £22 per week and 5 per cent. commission on the net profits of the shop. The plaintiff took £20 out of the till, £5 for petty cash expenses and £15 which he borrowed for the purpose of placing a bet in another betting shop. He knew that if he had asked the defendant for permission to borrow money from the till for gambling, it would have been refused. The plaintiff put an IOU for £15 into the till, which he took out the next day when he repaid the money into the till, his bet having turned out to be successful. The defendant, on hearing

[1967] 2 Q.B. 279 Page 280

of what had happened, dismissed the plaintiff summarily. In an action by the plaintiff against the defendant for damages for wrongful dismissal, the judge held that, although the plaintiff’s conduct was improper and reprehensible, it was not dishonest, and, therefore, the defendant was not entitled to dismiss the plaintiff summarily; he, accordingly, awarded the plaintiff £88 damages (being four weeks’ salary) and ordered the registrar to take an account of the commission due to the plaintiff.

On appeal by the defendant:-

Held, allowing the appeal, that even though the plaintiff’s conduct might not have been dishonest, it was nevertheless conduct of such a grave and weighty character as to undermine the relationship of confidence which should exist between master and servant, and, therefore, the defendant’s summary dismissal of the plaintiff was justified (post, pp. 287D, 289A-C, 290B).

Boston Deep Sea Fishing and Ice Co. v. Ansell (1888) 39 Ch.D. 339, C.A. applied.

APPEAL from Judge Baxter, sitting at West London County Court.

The plaintiff, Gerald Sinclair (hereinafter called “the manager”), was employed by the defendant, George Neighbour (hereinafter called “the employer”), who was a bookmaker and proprietor of betting shops, as the manager of the employer’s betting shop at Warwick Road, Kensington, W.8, in the county of Greater London. He commenced employment with the employer on March 23, 1965, as a settler and on March 29, 1965, was appointed manager at a salary of £22 per week and 5 per cent. commission on the net profits of the shop, commission to be payable monthly. On April 26, 1965, the manager came to the shop and found that he had no money on him. He said that he inadvertently left his wallet at home. He was a compulsive gambler and could not resist the urge to bet. He, therefore, took £20 out of the till, of which £5 was for petty cash expenses. He borrowed the remaining £15 for the purpose of placing a bet on his own behalf in another betting shop, putting an IOU for £15 into the till. He knew that the employer, if asked for his permission, would not have approved of borrowing from the till for the purposes of gambling. He placed his bet in another betting shop, which turned out to be successful, and on the next day he replaced the £15 in the till and took out the IOU. He told the two other employees in the shop, one of whom was a boy of some 18 or 19 years who was the grandson of the employer and the other an elderly man employed as a boardman, that he was borrowing the money. The boy told him that money had been borrowed from the till by

[1967] 2 Q.B. 279 Page 281

the previous manager. The other employee informed the employer on April 27, 1965, of what had transpired, and the employer thereupon summarily dismissed the manager.

In an action by the manager against the employer for damages for wrongful dismissal, the judge held that, although the manager’s conduct was improper and reprehensible, it was not dishonest and, therefore, the employer was not entitled to dismiss the manager summarily. He, accordingly, awarded the manager £88 damages (being four weeks’ salary at £22 per week) and ordered the registrar to take an account of the commission due to the manager. The employer appealed on the ground that the judge ought to have found that the manager’s conduct was dishonest or, alternatively, if not dishonest, that it was of such a character that the employer was entitled to dismiss the manager without giving notice.

Peter Bruce for the employer. This case is important for betting shops where large sums in cash pass through the hands of managers and other employees. In the present case the turnover of the shop in question was £1,000 per week. The judge accepted that the manager’s conduct was utterly reprehensible, and he said that he himself would have dismissed the manager immediately, but would have given the manager wages in lieu of notice. What that means on the judge’s findings is that an employer must pay £88 to an employee who has acted in this reprehensible way or else continue in employment a man who is completely unreliable. The employer submits that on the judge’s findings he should have held that the manager was dishonest and, therefore, that the employer’s summary dismissal of the manager was justified.

The judge has adopted the wrong test for deciding what amounts to dishonesty in cases of wrongful dismissal: he applied the test which is applicable in criminal law where a servant is accused of larceny, namely whether the particular accused person acted with a dishonest intent. That is a purely subjective test which is appropriate in criminal law. But in civil proceedings the test is not subjective, but objective. The position in civil proceedings for wrongful dismissal is that where a servant is guilty of a gross breach of good faith his employer is entitled to dismiss him for dishonesty. The employer submits that the taking of money by an employee out of the till when the employee knew that it would be forbidden by the employer, if the employer were asked for permission, is dishonest. The test in civil cases of dishonesty where

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the question arises whether a dismissal is justifiable is: has the employee acted dishonestly, having regard to his obligations vis-à-vis the employer? The judge relied on the fact that the two other employees in the betting shop knew that the manager had borrowed the money and also upon the fact that the manager’s loan was not surreptitious. But those matters can have no relevance where the test is objective, although they may be highly material where the question is whether the employee subjectively had a dishonest intent.

The point in the appeal is whether a servant who, without consent, puts his hand into the till to do his own betting can be summarily dismissed. The employer submits that such conduct merits the term “dishonest”. It is per se dishonest.

Even if the manager is only to be regarded as guilty of gross misconduct, the employer was entitled to dismiss him summarily.

[SELLERS L.J. You pleaded that he dishonestly misappropriated the money in the till.]

If, though an employer pleads dishonesty, he proves gross misconduct he is still entitled to succeed. There is no onus on the employer to establish every word which he puts in his pleading. The question is whether he establishes sufficient to justify summary dismissal. Even if the employer be confined strictly to his pleadings, he can succeed by way of amendment. In any event, it is a rule of pleading that the greater includes the less. Even in criminal proceedings on indictment if the charge be that a servant stole £800 the prosecution does not fail simply because it is proved that he stole only £300. The judge here has misdirected himself in relying on the burden of the criminal law, whereas here the appropriate test is the approach of the civil law. Once the position is obtained that a man as manager admits to being a compulsive gambler with access to the till and admits that he has borrowed money without permission from the till he is unsuitable to continue as a manager, and his employer is entitled to dismiss him summarily. Otherwise the employer would be left in the quandary of having to keep in employment a person who is obviously unfit for the job: the law would never be so foolish as to require that. The fact that the servant does not think that what he has done is wrong is not a relevant matter: see perFry, L.J. in Boston Deep Sea Fishing and Ice Co. v. Ansell.1

The question here arises in contract, not crime. The question is: has the conduct of the employee amounted to a repudiation

1 (1888) 39 Ch.D. 339, 369, C.A.

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of the obligations which he has undertaken under his contract of employment? If he has committed an act which is incompatible with the due discharge of his obligations under the contract, the employer can dismiss him summarily; see per Lord Esher M.R. in Pearce v. Foster,2 where a clerk who had speculated in differences on the stock exchange was held to have been justifiably dismissed summarily. The same principle is set out in Halsbury’s Laws of England, 3rd ed. vol. 25 (1958), p. 485, para. 934. The principle there stated is that if an employee does anything incompatible with the due and faithful discharge of his duty to his employer, his employer can dismiss him summarily. Even misconduct outside the course of a servant’s employment justifies summary dismissal. It must a fortiori be justifiable if it becomes impossible in practice for an employer to continue to employ an employee because of some act which he has done which is incompatible with his duty. The principle of Boston Deep Sea Fishing and Ice Co. v. Ansell3 is that, if a servant puts himself in a position where he has the temptation not to perform his duty faithfully, he can be dismissed without notice. The Court of Appeal there repudiated the view that, if the act in question was an isolated act, it could not be a breach by the employee of his employment which would justify his dismissal without notice: see per Bowen L.J.4 He said4 that if there is a violation of the relationship of confidence which should exist between an employer and an employee he can be dismissed. The employer submits that the manager’s misconduct in the present case was of such a gross nature and so immediate in its effect that it properly merited and required peremptory dismissal. Here is a man in a position of trust with money in his care and with employees under his supervision who abused that trust and dishonestly interfered with that money. The judge was in error in saying that he would dismiss the employee and yet pay him money in lieu of notice. If an employer is entitled to dismiss his employee, there is no need for the employer to offer any money to the employee. An employer can always dismiss an employee by giving him notice, or by offering him wages in lieu of notice, without assigning any reasons. It is only where there is a breach of contract which goes to the root of the employment that the employer is entitled to dismiss the employee without notice. Where he is entitled to dismiss the employee without notice, he need not offer any money.

2 (1886) 17 Q.B.D. 536, 539; 2 T.L.R. 534, C.A.
3 39 Ch.D. 339.
4 Ibid. 363.

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David Croft for the manager. The basic finding of the judge is that the manager was not dishonest. The manager inadvertently left his wallet at his home and he had sufficient money in his wallet to repay the money which he borrowed from the till. Moreover, he had an intention to repay. Where there is an intention by a person who borrows money to repay that money and he has a capacity to repay that money there cannot be a finding of dishonesty: Reg. v. Williams.5

[SELLERS L.J. That is evidence of whether there is dishonesty to go before the jury in a criminal case. But do you require conviction for dishonesty before you can dismiss your servant?]

Honesty must be the same in civil as in criminal law. It is not suggested that any act which is not criminal cannot be dishonest. It is admitted that the two are not necessarily co-extensive. But having shown that the manager took the money from the till, then unless it can be proved that there was a dishonest intent on his part it would not be a crime and would not constitute dishonesty. The quality of the act must be the same in whatever branch of the law the court is concerned. The test of honesty must depend on whether there is a corrupt intent. A lie need not necessarily be dishonest; it can be a white lie which is told to prevent humiliating someone’s feeling. The case here was throughout treated on the basis of whether the manager was dishonest. The employer was entitled to dismiss the manager only if the manager was dishonest, and he was not entitled to dismiss him on the ground that the manager had been guilty of some improper conduct which fell short of being dishonest. First, because the employer pleaded his case in that way and should be bound by his pleadings. An allegation of dishonesty is a serious allegation, and it was the allegation which was made in the pleadings, the correspondence between the parties before action, and throughout the case at the trial. Secondly, the manager having been dismissed on the ground of dishonesty and of theft, had then to find other employment where he had to be prepared to meet the allegation. It was a serious allegation to make reflecting as it does on his character and he was entitled to rebut it. Therefore, the sole question before the judge was whether he was guilty of dishonesty, that is to say of a corrupt intent. Although the question here arises in contract, one must decide whether the conduct of the manager was dishonest. For this purpose the principle that the greater includes the less does not apply because the misconduct

5 [1953] 1 Q.B. 660; [1953] 2 W.L.R. 937; [1953] 1 All E.R. 1068, C.C.A.

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different character. A servant cannot be dismissed on the ground of misconduct merely because of a lapse on his part: see per Lord Esher M.R. in Proctor v. Bacon.6

[SELLERS L.J. There the reason given for the dismissal was a trivial one.]

In the present case the allegation of dishonesty was raised and, if that had been proved by the employer, that would have been sufficient to justify the summary dismissal of the manager. But if he has to rely on misconduct, then there are two elements to consider: first, the breach of the relationship of confidence between the employer and the employee, and secondly, the gravity of the breach of that relationship. It is necessary in weighing the gravity of the breach to go into all the circumstances of the case. The court would need to investigate the relationship in the present case between the manager and the grandson of the employer who was employed in the betting shop and also the question whether the manager could reasonably assume that he need not telephone the employer for permission for the loan. In view of the nature of the pleadings the judge did not investigate the relationship between the parties in all the circumstances of the case. All that was investigated was the fact that the manager borrowed the money from the till, repaid it the next day, and that the employer would not have given permission for that loan. There is also the fact that it was an isolated case of borrowing from the till when the manager had inadvertently left his wallet at home. There is no suggestion that the manager permitted the other employees to borrow from the till nor any suggestion that he habitually gambled while he was in charge of the shop or habitually borrowed from the till. It is necessary to look at the manager’s behaviour and at the background to the whole case to see if his misconduct was sufficiently serious to merit instant dismissal. If an allegation of misconduct had been pleaded in the alternative by the employer, those matters would have been investigated. Failure on the part of the employer to plead misconduct as a ground for dismissal of the manager has meant that these matters were not investigated in the court below. Therefore, the employer should be bound strictly by his pleading and since he pleaded dishonesty and relied on dishonesty as a ground for dismissing the manager he should prove it or else fail in his defence.

6 (1885) 2 T.L.R. 845.

[1967] 2 Q.B. 279 Page 286

[SACHS L.J. An employee takes money without his employer’s knowledge, behind his employer’s back and against his wishes. Is that not dishonest?]

There would be no dishonesty if there was no corrupt intention. The court would not be whittling down any standard of conduct by saying that that conduct would not be dishonest. The note to R.S.C., Ord. 18, r. 12 at p. 385 of The Annual Practice (1966) says that the facts relied on as particulars of misconduct must be stated with especial particularity and care. In the present case that was not done. Unless the employer can prove dishonesty on the part of the manager, he is not entitled to succeed in his defence. For that was the ground upon which he relied and that is the ground which it falls upon him to make out. The fact that the manager’s conduct was improper cannot be investigated now so as to see whether it was sufficiently serious to justify dismissal without notice. For the Court of Appeal is not aware of all the circumstances of the case and unless it is aware of all the circumstances that matter cannot be decided. The judge’s finding that the manager was not dishonest was right and should not be disturbed. Therefore, the appeal should be dismissed.

Peter Bruce was not called upon to reply.

SELLERS L.J. In this case the employer might well have been content in all the circumstances to have left the judgment of the judge where it was. But he has thought fit to appeal, and this court has to deal with it and seek to draw the right conclusions from the evidence. The manager claimed damages for wrongful dismissal. He had been employed for very little more than a month. He had come on the staff for a short time in the employer’s business and had been made on March 29, 1965, the manager of a betting shop in Warwick Road, Kensington, the employer being a bookmaker and the owner of that and other shops as well. The manager was given peremptory notice of dismissal on April 27, 1965. The ground of dismissal which was alleged against him in the pleading was misconduct, which in the particulars was developed into dishonest misappropriation of some money. It appears that in that short interval of time the manager had taken some money out of the till because he wished to place a bet – outside the business. He seems, on the day before he was dismissed, on April 26, to have taken £5 out of the till – which he said he was entitled to take for petty cash: the matter is left obscure as to what happened to that – and in addition he

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took £15, went outside, and used it to back some venture. Apparently, that was successful. It is said that he put in an IOU; and he repaid the money the next day.

This case turns on the attitude which the employer could properly take to that conduct. It seems that the manager not infrequently used to telephone to the employer. He said he did it too often and so he did not think he would do it again over this matter. He took the money without asking. He thought that if he had asked, the employer might have lent him the money for some purposes, but that if he had told the employer that it was for betting the employer would not have agreed. He would not have permitted it. In my view, whether such taking of the money would have resulted in a conviction for larceny or for dishonest misappropriation of the money does not arise. On these facts a jury might have taken the view that they would not convict. But whether it is to be described as dishonest misconduct or not, I do not think matters. Views might differ. It was sufficient for the employer if he could, in all the circumstances, regard what the manager did as being something which was seriously inconsistent – incompatible – with his duty as the manager in the business in which he was engaged.

To take money out of the till in such circumstances is on the face of it incompatible and inconsistent with his duty. Some people might well say that to take money out of the till, when the manager knew that if he had asked if he could do it for the purpose which he might have had to disclose it would have been refused, is dishonest conduct. The question for this court to decide is whether, in the circumstances of this case, it was conduct in its nature, as it has been described, quite irrespective of any point of pleading, which justified the employer instantly dismissing the manager.

I think that it was. Counsel referred to some of the cases. I do not think that I need refer to them further. The whole question is whether that conduct was of such a type that it was inconsistent, in a grave way – incompatible – with the employment in which he had been engaged as a manager.

There was an aggravating feature, I think, in that there were in the office two others, including one boy who was only some 18 or 19 years of age who had said something about borrowing money out of the till and it was said that it had been done before. On a new manager coming in, I should have thought that the one thing that was incumbent upon him was to keep the

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till inviolate. The practice of taking money out of the till in that way, as all who have had experience in criminal courts know, can lead to endless trouble.

On the short facts of this case, and applying the law as I understand it, since we have been asked to do so, I would not hesitate to say that the dismissal was justified. I would allow the appeal accordingly.

DAVIES L.J. I agree.

The judge, in his very careful judgment, concentrated really on the employer’s pleading, in which was set out the alleged justification for the summary dismissal of the manager. In paragraph 3 it was stated:

“It was an implied term of the contract that the [manager] should not misconduct himself in the [employer’s] service, but before [April 27, 1965] the [manager] so misconducted himself and thereupon the [employer] dismissed him. …”

Under the particulars of that it was said:

“On April 26, 1965, the [manager] dishonestly appropriated to his own use the sum of £20, being money belonging to the [employer], or, in the alternative, money received by the [manager] for the use of the [employer] or his firm.”

There were various other further and better particulars.

It is perfectly true, as Mr. Croft pointed out in his argument, that the allegation throughout was one of dishonesty. The judge, having found the facts as they have been indicated by my lord, said:

“The reason given in the defence” – that is, for the dismissal – “is that the [manager] dishonestly misappropriated his employer’s money. He certainly misappropriated the £15. He knew that his employer would not have given leave to take the money for gambling. But I doubt that he took the money dishonestly. He was responsible for all money and would have to replace losses: he put in an IOU. He knew he would have to find the money as manager. He did return the money and before he was found out. He called attention to the fact that there was a deficiency and thereby invited an investigation. He told his subordinates that he was borrowing the money. He made no secret of the matter, though he could have borrowed surreptitiously. I have to come to the conclusion that, much as I disapprove of the [manager’s] conduct and sympathise with the [employer], I do not think that the [manager] was dishonest; his conduct was misguided foolish, improper and reprehensible, but not dishonest and that is what is pleaded.”

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With the greatest respect to the judge, I think that he fell into error in attaching too much weight to the label and not enough to the facts. The facts were established. The fact that the manager took the money from his employer’s till behind his back knowing that the employer would not consent was established; and it seems to me that it does not really matter very much whether that justifies the label “dishonest” or not. The judge ought to have gone on to consider whether even if falling short of dishonesty the manager’s conduct was nevertheless conduct of such a grave and weighty character as to amount to a breach of the confidential relationship between master and servant, such as would render the servant unfit for continuance in the master’s employment and give the master the right to discharge him immediately.

In my judgment, on the facts of this case the manager’s conduct clearly fell within that latter category; and I have no doubt at all that the employer was, therefore, entitled to dismiss him.

I would merely add something on another point made by Mr. Bruce for the employer. The judge, as I have said, came to the conclusion that the manager’s conduct was quite reprehensible and that, had the judge been the master in similar circumstances, he would himself have dismissed the manager instantly. Nevertheless, the judge, having come to the conclusion that he did, went on to hold that the manager was entitled to £88, which was four weeks’ wages, in lieu of notice, plus commission for the appropriate period. It does seem to me to throw a most tremendous burden on an employer, who finds that his servant has been guilty of “reprehensible, foolish, improper, misguided conduct,” that he must either leave him in office for whatever is the appropriate period of notice, when ex concessis he is unfit for the office, or, alternatively, give him wages in lieu of notice, and, semble, pay somebody else to do the job. That would seem, in the circumstances of this case, to be a wholly unreasonable position for the master to be forced into. I agree that the appeal succeeds.

SACHS L.J.: It is well-established law that a servant can be instantly dismissed when his conduct is such that it not only amounts to a wrongful act inconsistent with his duty towards his master but is also inconsistent with the continuance of confidence between them. That was said by Bowen L.J. in his classic judgment in Boston Deep Sea Fishing and Ice Co. v. Ansell.1

1 (1888) 39 Ch.D. 339, 363, C.A.

[1967] 2 Q.B. 279 Page 290

Here we have a case where the manager of a betting shop, responsible for the conduct of the shop and of the other employees there, quite deliberately takes out of the till money for his own personal purposes, in circumstances which he knew quite well his employer, if asked, would not permit.

To state those facts quite simply seems to me enough to make plain that here indeed there was beyond a peradventure misconduct of a type which justified instant dismissal; and I agree with the judge’s view where he uses the adjectives “utterly reprehensible” and “improper” in regard to that conduct.

I would add that, where you get such wrongful conduct as goes to the basis of confidence between employer and employee, it is wrong to suggest (as the judge did) that such a set of circumstances ought in law not to be met by immediate dismissal, unless accompanied by a payment of money in lieu of notice.

For my part, I go a little further, as regards my description of the conduct of a manager which I have just described. As between the employer and the employee (and that seems to me to be the cardinal matter), where the former deliberately takes money illicitly behind the back of his employer and appropriates it, even temporarily, for his own use, knowing that the employer would disapprove, that is sufficient, to my mind, to establish that as between the employer and the employee that conduct is dishonest. I agree, and would allow the appeal.

Solicitors: Bower, Cotton & Bower for Kidd, Rapinet, Badge & Co., Slough; Donald Silk & Co.

N. P.

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[Unlawful Dismissal] Sinclair v Neighbour

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