Adami v Maison de Luxe Ltd [1924] HCA 45; (1924) 35 CLR 143 (19 November 1924)

The appellant sued the respondent for wrongfully dismissing him from the position of its hall manager in breach of a special contract in writing, dated 27th March 1922, by which the appellant was engaged for three years from a designated date subject to a certain specified power of termination. The dismissal is admitted; but it is said to be justified for cause, as stated in par. 7 of the defence, namely, that "the plaintiff misconducted himself in the said service by refusing to carry out his duties in the said service and wilfully disobeying the reasonable orders of the defendant by it given to the plaintiff in the course of the service." Two distinct grounds of misconduct are thus set up, which, in view of the course the argument took, I transpose, namely, (1) wilfully disobeying the defendant's reasonable orders and (2) refusing to carry out his duties.

(1) Wilful disobedience of reasonable orders.—I may at once state that, having regard to the evidentiary facts before us, I should be of opinion, so far as this ground is concerned, that the appeal ought to be allowed to the extent of ordering a new trial instead of directing judgment for the defendant. My opinion is founded on the basis that the evidentiary facts leave it open to the jury to say whether the appellant in refusing to obey the direction referred to could and did honestly and reasonably believe that under the special terms of his contract it went beyond his obligations.

It was argued for the respondent that Turner v. Mason[1], with the cases there cited, and some other cases, including Clouston & Co. v. Corry[2], established a very strict and rigid proposition. It was contended that in all cases of employer and employee, irrespective of the nature of the employment—from messenger to manager, from domestic service to commercial or scientific service, whether it be the case of a housemaid or seaman on the one hand or the headmaster of a school or a hospital surgeon on the other, whether the duties be the well understood and universally implied household duties or those arising for the first time under a complicated written contract—the phrase "wilful disobedience of a lawful order" means simply conscious disobedience of an order obedience to which is found after litigation to be in fact and in law within the range of duties. The proposition asserts that, provided ultimately the order is found to be within the scope of the contract, it matters not how isolated and trivial the occasion may have been, how unimportant the disobedience in relation to the employer's affairs, how doubtful in fact or law the legality of the order may have been, how bona fide and reasonable may have been the contention of the employee or how clearly his action was intended and explained at the time as defence only and not in any way as defiance. That is a proposition I find it impossible to accept. No British case affirms it, and the relevant authorities contain much quite opposed to it. Turner v. Mason[3] was treated as the sheet-anchor of the proposition. But that case, which was decided on demurrer to the plea, necessarily accepted all the allegations of the plea as established. The contract was an implied one, the duty of a housemaid to stay in the house overnight could not be reasonably doubted, and the words of the plea that the plaintiff having been refused leave, and then "against the will of the defendant, and disregarding her having been so forbidden," were capable of no reasonable meaning but that of conscious defiance of the employer. The replication failed, notwithstanding its allegation of good intention, by not averring communication of the circumstances for the refusal. This, to some extent at least, is a reason militating against the proposition. Again Pollock C.B.[4] distinguishes between the case of a teacher and a domestic servant. Spain v. Arnott[5] was the case of a farm servant who was considered to have done a patently wrong thing, namely, "to set himself up to control his master in his domestic regulations." In Callo v. Brouncker[6] the dismissal was held to be unjustified. Amor v. Fearon[7] was not the case of disobedience of an order. Clouston & Co. v. Corry[8] by no means supports the proposition. There two grounds of justification were set up: first, disobedience of orders of the directors of the company respecting purchases of goods, and, secondly, misconduct by drunkenness for which the plaintiff was fined. In the New Zealand Appeal Court both grounds were fully dealt with, and the judgments will repay perusal (see Corry v. Clouston & Co.[9]). Much will there be found opposed to the proposition now under consideration, and especially in the judgment of Edwards J.[10]. In the Privy Council Lord James of Hereford says[11]: "The first ground of justification was during the argument before their Lordships very properly abandoned by the counsel for the appellants (the defendants), inasmuch as the second ground of defence presented facts of a much more serious character than the first." Seeing that the ground was "abandoned" and that the case proceeded entirely on a separate branch of justification, it is manifest that nothing in the judgment can be regarded as favouring the respondent's proposition. The only possible expression of guidance by way of principle is contained in the word "inconsistent"[12], and that does not assist the proposition. I observe that in Connell v. Gisborne Times Co.[13] Edwards J. adheres to his analysis of the relevant cases, and considers, as I do, that the Privy Council judgment contains nothing in derogation of his conclusion, which is in direct opposition to the view advanced for the respondent. Lilley v. Elwin[14], also relied on, has no relevance to this point. I think the observations of Parke B. in Cussons v. Skinner[15] and those of Maule J. in Smith v. Thompson[16] are, in spirit, opposed to the respondent's contention. I can, therefore, find no support in direct authority for the argument relied on.

How, then, does the matter stand upon principle? The word "wilfully" is a very inexact word, and its connotation depends largely upon the occasion of its use and upon its collocation. Translating it into "intentionally" does not help further than by eliminating the notion of moral obliquity. I cannot illustrate it better than by using the language of my brother Rich and myself in Gould v. Mount Oxide Mines Ltd.[17], where we were dealing with the term "wilful default." We said:—"Wilful default is a term which, like most other terms, must depend for its precise connotation on the subject matter and the context. It does not connote dishonesty. Here it means—a course of conduct consciously pursued in circumstances which would indicate to a reasonable man who considered the matter that the duty he has undertaken to the company is not being performed with due care for its interests." That was our view in 1916, and I need not, therefore, refer to Bennett v. Stone[18] further than by saying I believe the passage quoted is in strict conformity with the judgment of the Court of Appeal. But the effect of the word "wilful" varies, and, as I have said, the only universal guide is to ascertain from its surroundings what the word is intended to connote. One commanding circumstance is to ascertain the subject matter as a totality of which it is predicated that it must be wilful. Here the subject matter is not "disobedience," but "disobedience of a lawful order." It is the whole compound expression that must be "wilful," and not the one word "disobedience" adding a proviso "if the order be lawful." It is no doubt a correct principle that, once the relation of employer and employee is established, obedience to lawful orders is, if not expressly, then impliedly, contemplated by the contract creating the relation, and mere disobedience of such orders is a breach of the bargain. But whether disobedience in a given case is of such a character as to justify a complete dissolution of the contract by one of the parties and, as here, a forfeiture by the other of valuable accruing rights, together with some degradation—altogether a severe penalty—is, in my opinion, quite a different matter. Such a justification requires the disobedience to be as phrased "wilful disobedience of a lawful order." That is, it must be not merely a breach but a radical breach of the relation, and inconsistent with its continuance.

Once the element of "wilfulness" is introduced for the purpose of the summary rescission by one party of the whole contractual relation, with penal results on the other, then, as the "wilfulness" is the attitude of the employee, so far as it is conveyed by words or acts to the employer, the subject must be looked at from a new standpoint. "Wilfully" does not necessarily connote in that connection anything criminal or immoral, but it does connote some deliberate design or purpose to derogate from duty. See, for instance, R. v. Badger,[19], Smith v. Barnham[20], Forder v. Great Western Railway Co.[21], Bist v. London and South-Western Railway Co.[22], George v. Glasgow Coal Co.[23], Shaver v. Ingham[24] (the observations in which are worthy of notice) and Potter v. United States[25].

In face of the contest as to the facts, and the view taken of the situation by Schutt J. and by the jury, and particularly in view of the communication by the appellant to the respondent of his own understanding of the position in his letter of 6th July 1923, I should feel constrained to say the Court is not in a position to hold as a matter of law that there had been "wilful disobedience of a lawful order."

I have elaborated the first point because of its enormous importance to the whole community, because of the views on the point expressed in the judgment under appeal, and because in my opinion so harsh, unjust and unreasonable a rule as that embodied in the sweeping proposition contended for seems to me quite out of consonance with the common law applied to our commercial and everyday notions of fair treatment in industrial relations. When we abandon the idea of arbitrary unreasonableness and approach the matter from the standpoint of ordinary contractual rights, the solution seems plain enough. Any conduct on the part of either inconsistent with the maintenance of the relation created amounts to a renunciation, and the other has a right to terminate it. An order that is not so clearly implied or expressed as to be free from doubt has been left so by the act of both parties. A refusal to comply with it, if the employee, regarded as a reasonable man with knowledge of all the circumstances, may reasonably and does honestly contest it, is not, if respectfully communicated, a wilful disobedience of a lawful order, which by reason only of "wilfulness" entitles the employer to penalize the employee. The employee is there, to the knowledge of his employer, only acting in defence of his supposed rights—that is his only intention and purpose. He is not wilfully insubordinate. Other grounds may justify a rescission, as, for instance, the importance of the refusal apart from wilfulness or its effect on the general condition of the employer's business. That, however, concerns the second ground alleged here.

2. Refusal to perform duties.—I state first the relevant principle, which, indeed, has already been indicated. It is incontestable that any conduct of an employee which is not merely inconsistent with some particular obligation involved, and possibly not striking at the root of the matter, but which is inconsistent with the relation established, is a just cause for the employer's termination of that relation. Habitual neglect or a definite refusal of a general kind to pursue the employer's lawful policy of business would afford such justification. That is what has happened here. The direction as to Saturday afternoons was not an isolated order but was part of a business policy. The nature of the business was such that it was clearly within the contemplated scope of the employer's rights to select Saturday afternoons as a means for popularizing or extending the business. The refusal of the appellant to give his personal services and his determination to substitute another to take his place was an important and a definite and constant refusal to carry out the duties which, on a considered construction of the contract and circumstances, were, in my opinion, personally undertaken by the appellant in clause 4 of the agreement. He there undertook not only the "full control of the staff" but "the general supervision of the business" subject to the board of directors. That "control" and that "general supervision" might reasonably be directed by the company to include his presence at the hall and, inter alia, the checking of receipts. A general and total refusal of these duties after their specification was, whether the appellant was insubordinate or not, and whether "wilful" or not, a refusal which, by reason of the importance of the duties involved and the extent of the refusal, amounted in law to a renunciation entitling the employer to terminate the contract. For this purpose the letter of 6th July 1923 affords no answer. Under the second branch it is no longer, as it was under the first, a matter assumedly unimportant to the employer, or merely a question of the design and purpose of the employee. The effect of the refusal on the employer's business, and, therefore, its relative importance in the whole contract, are relevant considerations. Therefore, even putting aside "wilfulness" altogether, the legal effect of the refusal is to control the business, and that, in the absence of some provision in the law or the contract, is inconsistent with the general relation of employer and employed. There was no evidence before the Court upon which reasonable men could find otherwise: and thus (per Lord Halsbury in Bist's Case[26]) it becomes a matter of law that the appeal should be simply dismissed.

The defendant company is the proprietor of an amusement hall, which it uses for dances and other entertainments. The plaintiff was employed by the company as its hall manager for the term of three years from the opening of the business of the hall; and, while acting as such manager, he had the engagement and full control of all the staff of the company attached to any hall of which the defendant was the owner or lessee, and the general supervision of the business carried on by the company in connection therewith, subject always to the board of directors of the company.

About June 1923 the directors of the defendant company resolved to hold dances in the hall on Saturday afternoons from 2.30 p.m. to 5 p.m., and instructed the plaintiff to be on duty at the hall during those hours. But the plaintiff was a bookmaker and interested in a business which required his attention on Saturday afternoons, so he refused to attend the hall on those afternoons. The directors of the company dispensed with the plaintiff's services, as he definitely refused to carry out their instructions. Whereupon the plaintiff brought an action for wrongful dismissal in the Supreme Court of Victoria.

Clearly, it was for the directors to determine whether the hall should be used on Saturday afternoons for the purpose of their business; and equally clear was their right to determine, in the circumstances, whether the attendance of the plaintiff as hall manager was necessary or desirable on those afternoons. Schutt J., at the trial, left it to the jury to say whether the plaintiff's attendance on Saturday afternoons was reasonably necessary for the purpose of the efficient performance of his duties. But that charge cannot be supported. It was rejected in the Supreme Court, and was not sustained in the argument at the bar of this Court. Consequently we reach the position that the company gave a lawful order to the plaintiff which for his own purposes he deliberately and intentionally disobeyed. It was the plaintiff's duty under his contract with the company to obey its lawful orders and directions, and he therefore broke his contract.

The question is whether the company was entitled to dismiss him for that breach. Was the plaintiff's conduct such as justified the company in determining, and treating as at an end, his contract of service with it? "If there is a distinct refusal by one party to be bound by the terms of a contract in the future, the other party may ... treat the contract as at an end. ... Short of such refusal, ... the true principle to be deduced from all the cases is that you must ascertain whether the conduct of the party who has broken the contract is such that the other party is entitled to conclude that the party breaking the contract no longer intends to be bound by its provisions. This part of the rule was laid down by Lord Blackburn" in Mersey Steel and Iron Co. v. Naylor, Benzon & Co.[27], "where he says the rule of law is that where there is a contract beween two parties, each side having to do something, if you see that the failure to perform one part of it goes ... to the foundation of the whole, it is a good defence to say, I am not going to perform my part of it when that which is the root of the whole and the substantial consideration for my performance is defeated by your misconduct" (Rhymney Railway v. Brecon &c. Railway[28]). Now it may well be—and the cases and the books suggest the conclusion—that where it is a condition of the contract that the servant shall obey all lawful orders of the master, then a wilful or deliberate and intentional disobedience of any of those orders is tantamount to a refusal to be bound by the terms of the contract, entitling the other party to treat it as at an end, and to dismiss the servant (Turner v. Mason[29]; Pease and Latter's Law of Contract, 1st ed., p. 218). But it is unnecessary to pursue this topic, and therefore most undesirable that this Court should say anything to weaken the authority of Turner v. Mason, for acts of the plaintiff here did amount to a distinct refusal to be bound by the terms of his contract, and his failure to obey instructions was such as to go to the foundation and root of the whole contract between the parties.

The result is that the plaintiff was rightly dismissed in point of law, and the jury should have been so directed.

[1] [1845] EngR 777; (1845) 14 M. & W. 112.

[2] (1906) A.C. 122.

[3] [1845] EngR 777; (1845) 14 M. & W. 112.

[4] (1845) 14 M. & W., at p. 115.

[5] (1817) 2 Stark. 256.

[6] (1831) 4 C. & P. 518.

[7] [1839] EngR 388; (1839) 9 A. & E. 548.

[8] (1906) A.C. 122.

[9] (1904) 7 N.Z.G.L.R. 213.

[10] (1904) 7 N.Z.G.L.R., at p. 241.

[11] (1906) A.C., at p. 125.

[12] (1906) A.C., at p. 129.

[13] (1909) 28 N.Z.L.R. 299, at p. 304.

[14] [1848] EngR 312; (1848) 11 Q.B. 742.

[15] [1843] EngR 279; (1843) 11 M. & W. 161, at p. 172.

[16] [1849] EngR 713; (1849) 8 C.B. 44, at p. 55.

[17] [1916] HCA 81; (1916) 22 C.L.R. 490, at pp. 528, 529.

[18] (1903) 1 Ch. 509.

[19] (1856) 6 E. & B. 137, at pp. 157, 158, 164, 171.

[20] (1876) 1 Ex. D. 419, at pp. 423, 424.

[21] (1905) 2 K.B. 532.

[22] (1907) A.C. 209, at pp. 211, 213, 214.

[23] (1909) A.C. 123, at pp. 128, 129.

[24] (1886) 55 Amer. Rep. 712, at pp. 715, 716.

[25] [1894] USSC 259; (1894) 155 U.S. 438.

[26] (1907) A.C., at p. 212.

[27] (1884) 9 App. Cas. 434, at p. 443; 53 L.J. Q.B. 497, at p. 502.

[28] (1900) 69 L.J. Ch. 813, at pp. 818-819.

[29] [1845] EngR 777; (1845) 14 M. & W. 112.

High Court of Australia

Adami v Maison de Luxe Ltd [1924] HCA 45; (1924) 35 CLR 143 (19 November 1924)

HIGH COURT OF AUSTRALIA