The manager of the life insurance department of an insurance company recommended the issue of an endowment policy upon a life which the managing governor had a few days earlier refused to re-insure. He was thereupon dismissed, being given his current month’s salary and a month’s salary in lieu of notice:—
Held – (i) upon the facts the manager was entitled to more than one month’s notice, and the dismissal must be treated as a summary dismissal.
(ii) the one act of misconduct of the manager justified a summary dismissal.
Per Cur. The immediate dismissal of an employee is a strong measure, and it can be only in exceptional circumstances that an employer is acting properly in summarily dismissing an employee on his committing a single act of negligence.
Cases referred to
Baster v London & County Printing Works[1899] 1 QB 901; 34 Digest 79, 563, 68 LJQB 622, 80 LT 757.
Bombay Cotton Manufacturing Co Ltd v Motilal Shivlal (1915) LR 42Ind App 110.
Clouston & Co Ltd v Corry[1906] AC 122; 34 Digest 74, 509, 75 LJPC 20, 93 LT 706.
Edwards v Levy (1860) 2 F & F 94; 34 Digest 78, 553.
Appeal
Appeal from a judgment of the High Court of Judicature at Bombay in its appellate jurisdiction (Sir John Beaumont CJ, Rangnekar J), dated 19 March 1935, allowing (in part) the respondent’s appeal from the decree of that court in its ordinary original civil jurisdiction (Davar J), dated 23 August 1934, and awarding him the sum of Rs 17,000 as damages for wrongful dismissal from the service of the appellant company. The facts of the case are set out in the judgment of their Lordships, delivered by Lord Maugham.
R P Croom-Johnson KC and C P Harvey for the appellant company, referred to Baster v London County Printing Works, Bombay
[1937] 3 All ER 67 at 68
Cotton Manufacturing Co Ltd v Motilal Shivlal, Clouston & Co Ltd v Corry.
A M Dunne KC, Sir Thomas J Strangman KC and S P Khambatta for the respondent, referred to Edwards v Levy.
R P Croom-Johnson KC and C P Harvey for the appellant company.
A M Dunne KC, Sir Thomas J Strangman KC and S P Khambatta for the respondent.
15 April 1937. The following judgments were delivered.
Various questions were argued in the courts below, but the only question with which their Lordships find it necessary to deal is whether, assuming that, upon the true construction of the contract of service between the parties, the respondent’s employment was not terminable on one month’s notice, the appellant company was entitled summarily to dismiss the respondent from its service. In the view their Lordships take of the appeal, it is unnecessary to express an opinion upon the true construction of the contract of service, or on the question as to the proper measure of damages, if any were recoverable.
The appellant company carries on a large insurance business in Bombay. A firm called Lalji Naranji & Co were the managing agents, and Mr Lalji Naranji is, or was, the chairman of the board of directors of the appellant company. A Mr Mody was the managing governor, and was authorised to do all the business of the company, subject to the control of the managing agents. The respondent was at first in the service of the appellant company from 1 June 1925 until 1 June 1926, as a canvasser. In May 1928, the appellant company opened a life insurance department, and in that month the respondent re-entered its service as manager of that department. His salary began at Rs 200 a month. On 24 January 1930, after some other increases, it was raised to Rs 400 a month, as from 1 January, and, by a letter of 24 January, it was agreed that, in the event of the life department showing certain annual increases in the business, his salary would be gradually increased up to a maximum of Rs 700 a month. The letter concluded by saying: “In the event of your not being able to fulfil the guarantee mentioned above we have the right to terminate your engagement at any time thereafter by one month’s prior notice of our intention to do so.” The letter contained no other statement as to the notice to which the respondent was to be entitled if he was dismissed. It was contended on behalf of the respondent that, upon the true construction of the letter, he was entitled to continue in his employment for at least 31/2 years (afterwards extended to 41/2 years) subject only to the right to terminate under the concluding paragraph of the letter, in the event of the so-called guarantee as to increase of business not being fulfilled. Their Lordships do not think it necessary to express any opinion on this part of the case. The respondent was in fact dismissed from his employment on 21 December 1931, by a letter stating that his services were no longer required, and that the cashier had been instructed to pay him his salary for the current month, and also one month’s salary in lieu of notice. The letter was signed by Mr Mody as managing governor of the company, and both he and the secretary of the company deposed to the fact that the letter was written in that form
[1937] 3 All ER 67 at 69
out of consideration for the respondent, and in order that he should not find it difficult to obtain service elsewhere. Their Lordships were not persuaded that one month’s notice was sufficient unless the clause at the end of the letter of 24 January 1930, could be relied on, a question which depends on facts on which there have been findings in favour of the respondent. Their Lordships, therefore, must approach the matter as if the case was one of summary dismissal without notice, though clearly the position of the appellant company is not worse than it would have been if no salary in lieu of notice had been paid. The respondent, at the trial, and before their Lordships, has placed much reliance on a circular bearing date 31 October 1929, and circulated among the superior officials of the company. It was prepared by Mr Mody, who was therein described as the “managing governor,” for the guidance of the office establishment, and it stated that it had been found that no responsibility was fixed on any of the officers for any work, and it had therefore been decided to divide the work in the manner mentioned. To the managing governor was allocated the business of fire, marine and accident (foreign and up-country). To the secretary was allocated the business of fire, marine and accident (local business). There followed the words: “the life department, both local and up-country, will be looked after by the secretary entirely.” The circular stated that the company had two officers, namely, the managing governor and the secretary, and that the work of both these officers was supervised by the managing agents, and there was a number of other references to the duties of the managing governor. The respondent was not mentioned in the circular, nor was his position therein defined. The respondent has contended that the managing governor had no concern with the life insurance department, and that he was entitled to resent any action by the managing governor in supervising that department as being officious and intermeddling. The trial judge, however, refused to accept this view. The respondent was driven to admit, in the course of cross-examination, that the secretary, a Mr Iyer, had to be in constant consultation with Mr Mody about the details of the proposals for life insurance. Further, a number of documents was produced in court which showed Mr Mody’s habitual supervision of the life insurance business. Not only were the respondent’s statements with reference to this matter thus proved to be ill-founded, but, according to the judge, he was driven to invent falsehoods in order to get over the effect of the documents. Moreover, in addition to the evidence given by Mr Mody and Mr Iyer, which, according to the judge, stood unchallenged, there was evidence given by a Mr Shangji Narsingh Nagarmutt, the managing agent of several Indian insurance companies, who had been in constant touch with Mr Mody, and that evidence satisfied the judge beyond a doubt that the respondent’s story that Mr Mody was a figure-head in the office, so far as the life department was concerned, was a tissue of falsehood. Their Lordships have thought it right to mention these facts because so much reliance has been placed
[1937] 3 All ER 67 at 70
on the circular and its effect, both by the respondent and by the judges in the appellate court, but, for reasons which will appear later, they attribute a minor importance only to this matter.
The material circumstances are as follows. On 10 December 1931, the appellant company received by letter from the Bombay Mutual Life Assurance Society Ltd, an advice that it had received a proposal for life insurance from one Keshavji Manekchand, and the appellant company was requested to re-insure the risk up to Rs 10,000. This letter was immediately placed before Mr Iyer, the secretary of the appellant company, and was passed on by him in the ordinary course to Mr Mody, who occupied the same room in the office as Mr Iyer. It so happened that Mr Mody was well acquainted with the life proposed to be insured, he having been a neighbour of his for 10 years. Taking the view that Keshavji’s life was not a good one, and that the re-insurance was not in the interest of the appellant company, he wrote the word “declined” on the letter of 9 December, and initialled it. The letter and papers went back to the respondent as the branch manager of the life department. On 11 December or 12 December, the respondent (in accordance with the usual practice) had an interview with Mr Mody with reference to other life business, and he asked Mr Mody what objection there was to the acceptance of the proposal of re-insurance on the life of Keshavji. Mr Mody told him that Keshavji was his next-door neighbour and a friend, and that he knew more about him than anyone in the office did, and he did not want to entertain the proposal. The respondent started grumbling by saying that, if they refused proposals of that kind, they could not be expected to do a large business, to which Mr Mody replied that he did not want his company to get into trouble by accepting such risks, and that he would not change his decision. Accordingly, on 15 December, a letter was written to the Bombay Mutual Life Assurance Society declining the re-insurance proposition. It was prepared under the directions of the respondent, who initialled it, and it was signed on behalf of the appellant company by Mr Iyer.
On 19 December, there was laid before Mr Iyer a proposal for the direct life assurance of the same Keshavji for the sum of Rs 50,000. The accompanying papers included a note, initialled by the respondent, recommending the issue of a 10 years’ endowment policy. Mr Iyer, who habitually signed the appellant company’s letters on many subjects, dealing sometimes with as many as 300 in a day, had no recollection of having signed the letter of 15 December, refusing the proposal of re-insurance, and the note initialled by the respondent recommending the acceptance of the risk did not contain any reference to this refusal, nor to Mr Mody’s personal doubts as to the life proposed to be insured. On 21 December, the respondent again brought the papers to Mr Iyer, and pointed out that Mr Lalji Naranji, who was said to have been a friend of Keshavji, had written the word “accept” on the office note. The papers were left on Mr Iyer’s table, and the latter mentioned casually to Mr Mody,
[1937] 3 All ER 67 at 71
who was in the office, that the appellant company had accepted a direct insurance proposal for Rs 50,000 on the life of Keshavji. Mr Mody, who was surprised to find that Mr Iyer had not been informed of the refusal by himself of the re-insurance proposal, wrote the words “I am against this acceptance” on a slip which he attached to the papers, and he sent them back to the respondent’s department.
Mr Mody then sent for the respondent, Mr Iyer remaining in the room. Mr Mody reminded the respondent of the previous re-insurance proposal, and asked him why he had not made any reference to this fact in the note submitted to Mr Iyer on 19 December. Thereupon the respondent became very angry, and told Mr Mody that he had no business to ask him any question, and added that Mr Mody did not know how to behave himself. He then said: “I do not care for this job, and I can find such jobs anywhere.” Mr Iyer, who had kept silent, made a gesture suggesting that the respondent should be sent out of the room. Mr Mody asked the respondent to leave but he declined. Mr Mody then said, “All right, stand,” and on that the respondent left the room. Mr Mody and Mr Iyer held a short consultation, which resulted in the letter of dismissal being sent to the respondent. In considering the importance of the incident, it should be added that the proposed risk was of an exceptional character, both as to amount and as to the age of the proposer. The practice of the office was not to insure persons above the age of 50, and Keshavji was 52 at this time. Further, the practice was not to remain liable on any life in respect of a sum exceeding Rs 10,000, and it would therefore be necessary to re-insure for no less than Rs 40,000. Having regard, however, to the fact that Keshavji was insuring his life for a large sum with the Bombay Mutual Life Assurance Society, and that that society had been unsuccessfully seeking to re-insure with the company, it was obvious that a re-insurance to the amount of Rs 40,000 in respect of such a life might be very difficult to obtain on satisfactory terms.
The trial judge, as already stated, found that the respondent in his evidence had invented false incidents, imagined interviews which never took place, placed falsehoods into the mouths of people whom he did not venture to call as witnesses, and had put forward a fraudulent document. With regard to the proposals for re-insurance and for direct insurance on the life of Keshavji Manekchand, the respondent gave evidence that the proposal for direct insurance was received before the proposal for re-insurance, and that the reason why the latter proposal was refused was that Mr Iyer and the respondent, having discussed the matter together, agreed that there was no object in accepting a reinsurance proposal when the appellant company had already got a direct proposal for a larger amount. The judge, however, wholly disbelieved this story, and found that the facts were as set out above. The respondent went so far as to suggest in his evidence that the word “Decline” and the initials of Mr Mody on the re-insurance proposal dated 9 December
[1937] 3 All ER 67 at 72
1931, from the Bombay Mutual Society were not in fact written on the document at any time before the respondent’s dismissal, but were added by Mr Mody at some subsequent date, for the purpose of supporting the appellant company’s defence to the action. These suggestions also were wholly rejected by the trial judge. As regards the interview of 21 December 1931, which resulted in the respondent’s dismissal, it may be noted here as a remarkable fact that from first to last the respondent has given no intelligible explanation, apart from the false one above mentioned, of his conduct in recommending the risk (in the form of a 10 years’ endowment policy) without any reference to the fact that Mr Mody had, to his knowledge, and for a good reason, declined the re-insurance on the same life. It is not in dispute that, at the interview of 21 December, Mr Mody, with the consent of Mr Iyer, who was present throughout, began by asking for an explanation of the respondent’s conduct. It cannot be doubted that his conduct called for explanation. He, in fact, gave none. His own account of the interview at the trial, even if it could be believed, is wholly unsatisfactory. According to him, when he came into the room Mr Mody was very angry, and banged his fist on the table and asked in a loud tone why he had recommended Keshavji Manekchand’s proposal to the directors, and he said that he himself said that since the proposal had been received in the office it ought to be put before the directors, that Mr Mody thereupon said in a very loud tone, “I do not want this business to be accepted,” to which the respondent replied that it was his duty to put forward the papers, and that he was not taking any instructions from Mr Mody. The evidence of Mr Mody and Mr Iyer, which the judge accepted, was as set out above. The main point of difference between their version and the respondent’s was that they denied that Mr Mody had spoken angrily, and they spoke of the rudeness and violent manner displayed by the respondent.
Even if their Lordships could accept the view that the respondent was entitled to conduct the life insurance business without question or interference from Mr Mody, as to which they have above expressed their opinion, the respondent’s behaviour, according to his own statement, was intolerable. It is important to remember that, on the one hand, Mr Mody had, only a week before, told the respondent that Keshavji was his next-door neighbour, and that he did not approve of the risk. It could not be in any way proper to approve the risk and to forward it to the directors without a statement of these facts. Even if Mr Mody had no authority in the matter his view, founded on special knowledge, ought not to have been in effect suppressed. In the second place, Mr Iyer, who was admittedly the official in charge of the life department, and the respondent’s superior, was present, and, if the latter really doubted the authority of Mr Mody to require an explanation, what could be easier than to ask Mr Iyer if he authorised the question and desired an answer? According to his own account, the respondent refused to explain his conduct, and Mr Mody and Mr Iyer might very
[1937] 3 All ER 67 at 73
well come to the conclusion that it was not capable of any proper or satisfactory explanation. As regards the explanation which Mr Mody asked for, it should be added that he was clearly in a position which required him to make inquiries as to every matter touching discipline and the rightful conduct of business. To take a strong illustration, suppose that there was ground for thinking that an official had been bribed in relation to the acceptance of a risk, could anyone doubt that it would be the duty of the managing governor to make inquiries, and to submit the result of them to the managing agent? The notion that the circular (or any possible construction of it) furnishes an excuse for the respondent’s refusal to explain or to defend his action and omission, in relation to the risk, to both Mr Mody and Mr Iyer seems to them to be without foundation.
Their Lordships do not take the view that the outrageous conduct of the respondent at the trial, including his inventions of interviews, his false charges, and the tissues of falsehoods of which the trial judge has found him guilty, has any direct bearing, other than an evidential one on the question whether he was properly dismissed, but they must observe that, in so far as anything turns on the correctness of the view formed by Mr Mody and Mr Iyer as to whether it was reasonably possible for the company any longer to employ the respondent, his behaviour in the witness-box makes it exceedingly difficult to conclude that their view was a wrong one. If there were any doubt as to the real meaning of the respondent’s conduct at the interview, it would be removed by the letter written by his attorneys (on 13 January 1932), after his dismissal. They state their client’s view as follows:
‘On the 21st ultimo Mr. Mody tried to interfere with our client’s work and to dictate to him certain things which he had no right to do and which in our client’s opinion was a most improper thing to do. Our client naturally did not agree with Mr. Mody’s instructions. … Our client rightly resented this interference from Mr. Mody and stated to him that he was not prepared to take any instructions from him in the matter.’
Their Lordships find it impossible to understand how the managing governor of the company could properly supervise the business if a subordinate officer chose, not only to adopt this attitude, but in effect to overrule the decision of his superior, in a case in which the latter had peculiar means of knowledge as to the danger of accepting a risk. Nor did the respondent improve matters by instructing his solicitors, on 1 February 1932, to write a letter containing serious charges against Mr Mody of giving “improper instructions” to the respondent—charges which there was no attempt whatever to justify at the trial.
Their Lordships recognise that the immediate dismissal of an employee is a strong measure, and they have anxiously considered the evidence with a view to determine the question whether the trial judge was right in his finding that the respondent was guilty of gross negligence, which, coupled with his conduct at the interview of 21 December, was sufficient to justify his dismissal. On the one hand, it can be in exceptional circum-
[1937] 3 All ER 67 at 74
stances only that an employer is acting properly in summarily dismissing an employee on his committing a single act of negligence; on the other, their Lordships would be very loath to assent to the view that a single outbreak of bad temper, accompanied, it may be, with regrettable language, is a sufficient ground for dismissal. Sir John Beaumont CJ was stating a proposition of mere good sense when he observed that in such cases one must apply the standards of men, and not those of angels, and remember that men are apt to show temper when reprimanded. Placing, however, all proper weight on these considerations, their Lordships have yet to determine, in view of the facts found by the trial judge, apart, of course, from the vital finding that the circumstances justified dismissal, whether the misconduct of the respondent was not such as to interfere with and to prejudice the safe and proper conduct of the business of the company, and therefore to justify immediate dismissal. It must be remembered that the test to be applied must vary with the nature of the business and the position held by the employee, and that decisions in other cases are of little value. We have here to deal with the business of life insurance. A mistake in accepting a risk may lead to a very considerable loss, and repetition of such mistakes may lead to disaster. The undertaking is one in which the undertaking of each individual risk is necessarily hazardous, and it is only by unremitting care and prudence that the business can profitably be carried on. If an officer of a life insurance company, whatever his motive may be, withholds from his superiors information which will in all probability lead them to refuse a risk, and a fortiori if it is one of exceptional character and magnitude, it would seem to be very difficult for his superiors to be confident that he will, in the future, properly carry out the important duties entrusted to him. In other words, if a person in charge of the life assurance department, subject to the supervision of superior officers, shows by his conduct or his negligence that he can no longer command their confidence, and if, when an explanation is called for, he refuses apology or amendment, it seems to their Lordships that his immediate dismissal is justifiable.
Some, at least, of the above considerations seem not to have been present to the minds of the judges on the appeal to the High Court. In particular, their Lordships cannot agree that the respondent was guilty of a mere error of judgment. They are satisfied, from the evidence given at the trial, that the respondent recommended the issue of the endowment policy, well knowing that the managing governor would have rejected it, and in the hope or the expectation that Mr Iyer would not remember the facts as to the re-insurance proposal. They take a serious view as to the interview of 21 December, and they draw a different inference from that of the judges as to the true meaning of the respondent’s behaviour. Further, and with all respect to the judges in the Appeal Court, they are of opinion that it is a mistake to consider the action of the respondent in approving the risk, and his conduct at the interview,
[1937] 3 All ER 67 at 75
as if these two matters could separately be excused or explained. They are in truth inseparable from the point of view of the action of Mr Mody and Mr Iyer in giving the notice of dismissal. On a review of the whole case, their Lordships must come to the conclusion that the trial judge was justified in his view of the facts, and in the conclusion at which he arrived.
For the reasons above stated, their Lordships are of opinion that the appeal should be allowed, the decree of the Division Bench set aside, and the decree of the trial judge restored. The respondent will pay to the appellant company its costs of the appeal to the Division Bench and of this appeal, in addition to the costs awarded by the trial court. They will humbly advise His Majesty accordingly.
Solicitors: E F Turner & Sons (for the appellant company); T L Wilson & Co (for the respondent).