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Scottish Court of Session Decisions |
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You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Watson v. Student Loans Co Ltd [2005] ScotCS CSOH_134 (12 October 2005) URL: http://www.bailii.org/scot/cases/ScotCS/2005/CSOH_134.html Cite as: [2005] ScotCS CSOH_134, [2005] CSOH 134 |
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Watson v. Student Loans Co Ltd [2005] ScotCS CSOH_134 (12 October 2005)
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OUTER HOUSE, COURT OF SESSION [2005] CSOH 134 |
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A2788/01
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OPINION OF LORD HARDIE in the cause IAN SMITH WATSON, Executor Nominate of the late RONALD JOSEPH HARRISON Pursuer; against STUDENT LOANS COMPANY LIMITED Defenders:
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Pursuer: J L Mitchell, Q.C., Skinner, Advocate; Balfour & Manson
Defenders: Connal, Q.C., Solicitor Advocate; McGrigor Donald
12 October 2005
Introduction
[1] From 10 January 1990 Ronald Joseph Harrison (hereinafter referred to as "the deceased") was employed by the defenders as their Chief Executive for a fixed period terminating on 9 January 1998 (22/24 of process). On 10 March 1995 the defenders terminated the deceased's employment. In October 1996 the deceased raised the present action seeking damages for breach of contract. By reason of the deceased's ill-health his evidence was partly heard on commission but was not concluded prior to his death on 18 January 2000. Following the death of the deceased the pursuer sisted himself as a party to the action in his capacity as Executor Nominate of the deceased.
Issues
[2] The first issue for my determination is whether the deceased was in breach of his contract of employment to the extent that the defenders were entitled to dismiss him on grounds of gross misconduct. In the event of my concluding that the dismissal of the deceased by the defenders was unjustified and as such amounted to a breach of contract by the defenders, the second issue for my determination is the amount of damages to be awarded to the pursuer. In that regard although there was a dispute about the date to which damages should be calculated a Joint Minute recorded the agreement of parties concerning the calculation of the damages payable in respect of each of the competing submissions.Procedural issue
[3] Although the deceased's evidence had been partly heard on commission on 23, 24 and 28 November 1999 the first witness whose evidence I heard was Kenneth Middleton Young who was the Chairman of the defenders at the date of the dismissal of the deceased. Despite his connection with the defenders Mr Young was called as a witness for the pursuer. At the beginning of the second day of Mr Young's evidence he confirmed in answer to questions from senior counsel for the pursuer that he had read the three volumes of the transcript of the deceased's evidence taken on commission and that these had been given to him by the defenders' solicitor "for background briefing". I was thereafter addressed, outwith the presence of the witness, about the propriety of his having been given the transcript and the effect of such action on the proceedings before me. It was clear, as counsel for the pursuer stated, that Mr Young would not have been permitted to be in Court during the evidence of other witnesses, including the pursuer, had the proof followed its normal course. In the course of his response the solicitor advocate for the defenders stated that he had been asked whether the transcripts should be shown to a number of witnesses but he had answered in the negative. On the other hand he considered that Mr Young was the equivalent of the principal in the action. Mr Young had been treated as the client until his retiral as Chairman and Mr Connal did not consider anything wrong with Mr Young being given the transcripts. It became clear in the course of discussion that Mr Connal was without full instructions and I considered it desirable that any debate about this matter should proceed on an informed basis. I accepted, as Mr Mitchell observed, that if issues of credibility and reliability arose the fact that Mr Young had heard the entire evidence of the deceased may be of some significance. However, I considered that the debate concerning the provision of transcripts to the witness could be deferred until Mr Connal had had the opportunity of ascertaining the full factual position. Accordingly I decided to defer consideration of this matter until the following day and to proceed with the evidence of Mr Young. The following day I was advised by Mr Connal that he had ascertained that on 27 January 2004 his instructing solicitors had sent copies of pages 36 to 49 inclusive of Volume 1 of the deceased's evidence together with copies of letters and other productions mentioned in the transcript to another potential witness, Sir Geoffrey Holland. Following his citation on behalf of the pursuer, Sir Geoffrey had contacted the solicitor for the defenders to ascertain why he might be required as a witness. There had been a brief discussion about this matter as a result of which the documents were sent to him. He was also advised to contact the solicitors for the pursuer. I was also informed that Mr Young had given a precognition to the defenders' solicitors and thereafter had attended a meeting on 10 February 2004 with the principal instructing solicitor to discuss preparations for the proof. At that meeting he had been given the three volumes of the deceased's evidence but there had been no discussion about their contents. At a subsequent meeting in April 2004 the matter was not discussed. I was advised that as a result of the passage of time all the senior officials of the defenders at the date of the deceased's dismissal had left the company and nobody remained with the relevant knowledge. Indeed Mr Young had provided the solicitors with a number of documents from his own records. The view had been taken that in the circumstances Mr Young was in effect the client although the "technical position" was that he was not because he had retired as Chairman some time previously. It was stated that the reason for giving Mr Young the transcripts was that it had been the view of the instructing solicitor that Mr Young would have been entitled to be in Court during the pursuer's evidence and the evidence of other witnesses, if the proof had followed the normal course. In response Mr Mitchell submitted that it was untenable to maintain that at the relevant time Mr Young was in the position of the client. The evidence had already disclosed that Mr Young was appointed Chairman in 1992 and had been Chairman for 4 years. Thus approximately 8 years had elapsed between his retiral and the meeting on 10 February 2004 when the transcripts were given to him. The actions of the defenders' solicitors in providing Mr Young with the transcripts had influenced his evidence. Counsel for the pursuer had been alerted to the possibility that Mr Young had had access to the deceased's evidence because it appeared that Mr Young was phrasing his answers against a background of the evidence taken on commission. It was submitted that the actions of the instructing solicitor were not for the purpose of obtaining instructions from the company but rather were in anticipation of Mr Young giving evidence. [4] Although Mr Connal was asked on several occasions whether he accepted with the benefit of hindsight that what had occurred was wrong, he refused to answer the question directly and sought to justify the actions of his instructing solicitor, who is also one of Mr Connal's professional partners. Mr Connal only acknowledged that what had occurred was wrong when he was given specific instructions to that effect by his partner, who was present in Court. [5] Apart from any implications for the assessment of credibility and for the weight to be attached to the evidence of a witness who may have been influenced by having improper access to the evidence of the deceased, it seems to me that this incident raises issues of general importance for the profession in Scotland. While it is perfectly legitimate to precognosce or reprecognosce a witness in the light of evidence already led, it has never been permissible in Scotland to brief or coach a witness with a view to his altering his evidence. I would also venture to suggest that it is not appropriate for solicitors to take any action in respect of a witness that might be perceived as briefing or coaching him or that might result in the witness departing from the evidence which he would have given but for the intervention of the solicitor. While I accept that the instructing solicitor did not intend such a result when he provided Mr Young with the transcripts of the deceased's evidence, it is significant that when the matter was first raised with Mr Young he stated that he had been given the transcripts by the instructing solicitor "for background briefing". It was also acknowledged by Mr Connal that the actions of the solicitor may have resulted in a departure from the evidence which Mr Young would have given although it had not been the intention to influence his evidence. Although Mr Young had been the Chairman of the defenders at the time of the deceased's dismissal and as such was the person from whom the instructing solicitors might expect to receive instructions, he had ceased to be in the position of a client almost 8 years before the transcripts were given to him. [6] Although Mr Young was Chairman of the defenders at the material time, the position of Sir Geoffrey Holland was quite different. He was not a director of the company at the relevant time. Until 1994 he was a senior civil servant who had dealings with the company when the deceased was its Chief Executive. He had been cited as a witness by the solicitors for the pursuer. It is difficult to understand why the solicitors for the defenders considered it appropriate to send this potential witness copies of a section of the transcript of the deceased's evidence together with other productions. In the event Sir Geoffrey Holland did not give evidence but I would have thought that the appropriate course for the defenders' solicitors was simply to advise Sir Geoffrey to contact the pursuer's solicitors if he had concerns as to the reason for his citation. It was not the function of the defenders' solicitors to provide him with the evidence of the deceased relating to his dealings with Sir Geoffrey. [7] What happened was clearly wrong. In fairness to the instructing solicitor he readily acknowledged that fact despite Mr Connal's reluctance to do so. Solicitors involved in litigation should be careful to avoid taking any steps in relation to witnesses which go beyond the permissible boundaries of legitimate precognition. [8] A further concern relates to the attitude adopted by the solicitor advocate for the defenders when confronted with the difficulty concerning the provision of the transcripts to Mr Young. To begin with he sought to justify the actions of his partner and instructing solicitor without being fully aware of the factual circumstances. When he was aware of the circumstances he sought to excuse the actions of his partner and refused to acknowledge, even with the benefit of hindsight, that what had occurred was wrong. He maintained that position until his partner instructed him to acknowledge that an error had been made. It is essential that those appearing before the Court recognise that their primary obligation is to the Court even if the performance of that duty involves criticising a professional colleague, including a partner.Factual background
[9] The evidence of the deceased was taken on commission over a period of 3 days but was not completed prior to his death, and the hearing before me lasted 13 days and involved several volumes of documentary productions. Despite that there was little factual dispute. [10] In 1989 the defenders were established following the decision of the then government to introduce student loans. Initially a number of banks were involved with the government in the project and at the outset the deceased was recruited as Chief Executive by the banks with the approval of the then Secretary of State for Education. The Secretary of State appointed two civil servants, John Vereker and Thomas Jeffrey, as directors with Mr Vereker being the Chairman of the company. In December 1989 Mr Vereker contacted the deceased and told him that the banks were withdrawing from their arrangement with the government. In January 1990 the Secretary of State for Education requested the deceased to prepare a 5 year plan to implement the government's policy through the medium of the defenders. Between January and June 1990 the deceased recruited executives to work for the defenders and placed contracts with such organisations as were willing to be seen to be working with the defenders. In June 1990 Royal assent was given to the company and at that time the deceased was appointed Chief Director and Managing Director. In or about November 1990 the deceased was appointed Chief Executive of the defenders. There was a considerable amount of hostility towards the government's policy from academics, students, politicians and the media. The government required the scheme to be operational by 1 September 1990. To that end the deceased and the other persons recruited by him worked abnormally long hours. In addition because of the hostility towards the project they were subject to personal abuse. Despite these difficulties the deceased succeeded in meeting the challenges. On 5 November 1990 the Permanent Secretary of the Department of Education and Science wrote to the deceased congratulating him upon his achievements in relation to the defenders. (20/6 of process) In that letter the author wrote:-"Until you actually see what is going on in Bothwell Street it is difficult to gain a true appreciation of what you all have succeeded in doing in creating a thriving and effective operation from a standing start in an incredibly short space of time".
"Much management effort has properly been expended on raising SLC from its pariah-like beginning to that of a substantial financial institution providing a valuable service professionally".
"It is clear from the report that the auditors have discovered no evidence to support any of the allegations of corruption or serious impropriety. Moreover, the anonymous letter has been clearly shown to be wrong in many respects. Nevertheless my Board and I considered very carefully whether there might conceivably be justification in enlisting a police investigation into any of the allegations. Our unanimous and unequivocal view was that the weight of evidence that there has been no corruption or serious impropriety in the Company is so overwhelming that it would be wholly unwarranted and unreasonable to initiate such an investigation, quite apart from all the damage that would inevitably result to the company, to the individuals concerned and to those with whom the Company does business. We are convinced that we are dealing with a grudge letter which has no foundation in truth".
In paragraph 8 he stated:-
"Finally, I am sure you will appreciate the effect of this disturbing business on the Chief Executive of the Company, Mr Harrison. I record here that notwithstanding the extreme provocation represented by the anonymous letter he has behaved throughout with admirable dignity, fortitude and, above all, concern for the future well-being of the Company: he has the full confidence and support of myself and my Board colleagues. Moreover, with the aim of ensuring that Mr Harrison's reputation and credibility are not damaged in the eyes of the Public Accounts Committee we request that you arrange for this letter and its enclosures to be sent forthwith to the Clerk of the Committee and to be sent in confidence for the obvious reason that publication would give wider circulation to damaging allegations which are unfounded".
"Barry had to move from one flat to another. The Company mail room staff were instructed to help him move and were paid by the Company for their work".
In relation to that matter Mr Young's note dated 29 October records, under the heading "Use of Mail Room Staff", that he asked the deceased for further clarification and "He has stated his belief that no mail room staff were instructed to help with his son's move". This entry became of some significance in the decision to dismiss the deceased. Allegation 23 related to John Morrison, the Finance Director of the defenders. It was in the following terms:
"John Morrison, the Finance Director, is more concerned with telephoning his married girlfriend in Canada every day or having a junket with her in London at the expense of the Company".
The report of the internal auditors disclosed that Mr Morrison was making regular telephone calls to Canada but was reimbursing the company. In relation to the other matter an examination of his travel/expenses claims for the relevant financial year disclosed one visit to the London area covering a period which included a weekend. The internal auditors concluded that the visit appeared to have included some time for private business but they did not consider that the amounts claimed were excessive and they had not made any further detailed inquiries of Mr Morrison. In respect of this matter Mr Young's note dated 29 October records that at the Board meeting the deceased "stated that he had established, and verified, that the Finance Director had attended a meeting at the Department for Education on the Friday; and that he had charged only his travel expenses, not his subsistence, to the Company". This matter also featured in the reasons for the ultimate dismissal of the deceased because Mr Young considered that the deceased had misled him by saying that he had verified these matters.
[14] On 10 November 1992 DFE responded to the NAO to the effect that the anonymous letter was a grudge letter with no foundation in truth. In or about December 1992 Mr Young received another undated anonymous letter repeating some of the earlier allegations but adding others. All of these allegations related to the deceased. They were ultimately dismissed as unfounded. [15] In or about April 1994 a third anonymous letter was sent to the Internal Audit Division of DFE (48/17 of process). The allegations included a reference to the change in the date of an invoice for a dinner attended by the deceased on 1 January 1992. The letter also referred to a former employee, Carthy, who had been the Director of Administration of the defenders. Carthy had also been mentioned in the first anonymous letter. Although the date on an invoice had been changed it was accepted that the deceased was not responsible for that. There was a strong suspicion that Carthy had changed the date of the invoice to substantiate the false allegation against the deceased. There was also a strong suspicion that Carthy was the author of the anonymous letters. [16] In or about July 1994 Carthy sent a letter to the Chairman of the Public Accounts Committee and on 31 August 1994 Carthy met with the Assistant Auditor General and an audit manager at the NAO when he repeated many of the allegations in the earlier anonymous letters. By this time Carthy was no longer employed by the defenders. On 30 September 1994 Carthy signed and returned the note of his meeting with these officials and his covering letter added further details of his allegations. The signed note of the meeting is 48/20 of process and the covering letter from Carthy is contained within the background papers sent to Coopers and Lybrand by DFE on 11 October 1994 (48/21 of process). [17] On 11 October 1994 DFE appointed Coopers and Lybrand to investigate the allegations. On 17 October the deceased responded to Coopers and Lybrand and enclosed various documents (48/23 of process). These documents included evidence to refute Carthy's allegations about the deceased's lunch expenses contained in paragraphs 14-17 inclusive of the note of his meeting with NAO (48/20 of process). In short Carthy's allegation was that he frequently had lunch with the deceased when no third party was present and on such occasions Carthy was instructed by the deceased to charge the cost of the lunches as a company expense and to recover the cost from the company. On several of the occasions specified by Carthy it was possible to establish from the deceased's diary that he was elsewhere, including abroad, or on holiday, or with others including the Chairman and an ex-Chairman of the defenders. On 1 December 1994 Coopers and Lybrand submitted a draft report on their investigations to DFE (48/24 of process). That document disclosed that Carthy had not co-operated with the investigation and the investigators had been unable to interview him. In contrast the deceased had co-operated. However paragraph 110 of the draft report is in the following terms:"Since we began our investigation we have heard that Mr Harrison has become unwell. We have not yet discussed with Mr Harrison the provisional conclusions we have reached. We would like to give him the opportunity to respond to those provisional conclusions which appear critical of his conduct or otherwise are unfavourable to him as soon as his health permits us to do so".
The report also recorded that the investigators were critical of Carthy's conduct. In November 1994 the deceased was unfit for work due to illness.
[18] By letter dated 6 December 1994 (48/24 of process) Mr Young sent a copy of the draft report to the deceased at Ross Hall Hospital, Glasgow and was in the following terms:"First, all your Board colleagues hope that you are feeling much better and will soon be well again.
Today the Board considered the Coopers and Lybrand draft report on Mr Carthy's allegations. As the report makes clear, the investigation has produced some preliminary conclusions on a number of these allegations. The great bulk of them have been found to be false or unsubstantiated. However you should know that the Board was concerned by several passages in the report, and was particularly disturbed by what is set out in Appendix D.
The Board does understand that the investigators have not yet discussed their preliminary conclusions with you. Clearly, therefore, as soon as you feel well enough, you must be given the opportunity to respond to those which appear critical of your conduct. The Board has therefore not come to any final view on such criticisms. The Board is also adamant that you must not put your health at risk by coming back to work before you fully recover".
By letter dated 9 December 1994 (48/25 of process) the deceased advised Mr Young that he had left hospital but the consultant physician had prescribed medication and asked the deceased to see him the following week. The clear instructions of his physician were that the deceased must take time without any further pressure of any sort, domestic or business, to enable the physician to assess the deceased's ability to return to work. On 13 December 1994 Dr Mackay, the deceased's consultant physician, wrote to the defenders relating to the deceased's health confirming that he had advised the deceased to remain off work until at least January 1995 (48/26 of process).
[19] By letter dated 16 December 1994 (48/27 of process) Mr Young wrote to the deceased advising him of the appointment of an acting Chief Executive. Thereafter its terms were as follows:-"As I indicated in my previous letter and during our discussion, the Board is very concerned about the criticism of your conduct contained in the draft Coopers and Lybrand report but has not come to any final view on those criticisms because we feel strongly that you must have a chance to respond to them.
As you will appreciate, the question of you resuming your duties as Chief Executive is necessarily conditioned not only by your state of health but also by your ability to answer satisfactorily the criticisms as reported and especially on whether you can show that the conclusions are invalid.
The Board therefore needs to know whether you soon intend, as invited in the draft report, to comment on those conclusions. We would be grateful if you would let me know your intention in this regard as soon as possible.
We understand that the draft report is being uprated in some respects and that a revised version will soon be ready ...."
On 29 December 1994 Mr Young again wrote to the deceased enclosing a copy of a revised draft report by Coopers and Lybrand (48/28 of process). This letter referred to the Board having read the opinion of leading counsel engaged by DFE to the effect that the deceased's conduct as reported by Coopers and Lybrand could amount to serious misconduct justifying summary dismissal. Thereafter the letter continued as follows:-
"It is a matter of great concern to the Board that the report seems to be supported by oral and documentary evidence and that some of its most serious conclusions seem to be fully corroborated. Nevertheless, as was made clear in my letters of 6 December and 16 December, the Board has avoided coming to a final view because it has wished you to be given an opportunity to comment and, if possible, to rebut. That is still the Board's position. However, as you will appreciate better than most, there will be serious detriment to the business if the post of Chief Executive in a company like this is allowed to remain substantively unfilled for long. We have made dispositions to try to cover your absence - notably by appointing an Acting Chief Executive - but Sir Eric's appointment, as you know, is both temporary and part-time. To safeguard the company's interest, therefore, it is imperative that the Board comes to a final view on the C & L report soon.
The Board has therefore decided that I should again urge you to comment on what the report has to say about your conduct, AS SOON AS POSSIBLE and by FRIDAY 20 JANUARY 1995 AT LATEST. By that date it will be nine weeks since your absence began, and the Board will no longer be able to put off reaching its own conclusion".
"1. Poor judgement and unwarranted extravagance in relation to personal expenses;
2. Slackness in financial control over expenses and overtime (including in respect of staff resources deployed to assist your son in moving flat);
3. Exaggeration and economy with the truth;
4. Misleading the Chairman, the Board, the Department for Education, the National Audit Office and the Public Accounts Committee regarding your son's flat move".
The letter indicated that the disciplinary action which may be taken might extend to dismissal. On 24 January 1995 both the deceased and Dr Mackay wrote to Mr Young advising him that the deceased was unfit to attend such a hearing. By letter dated 16 February 1995 Mr Young responded by fixing an alternative hearing date for 3 March 1995. In his letter he recognised that the deceased might still be unfit to attend, but indicated that he could be represented by a friend or he could make supplementary written submissions if he wished.
[21] On 3 March 1995 the deceased was unable to attend the Disciplinary Hearing because of ill-health. The pursuer attended as a friend and tendered a medical certificate from Dr Mackay which confirmed that for at least a year prior to November 1994 the deceased had been suffering from temporal lobe epilepsy manifesting itself as attacks of loss of consciousness lasting up to an hour with confusion and headaches in the post ictal state lasting for as often as a day or two at a time. The frequency of the attacks increased markedly in the last quarter of 1994. As a result of his illness the deceased was "vague, often confused and very often unable to give a clear account, not only of his present experience but certainly of past events". The report also referred to the earlier medical report dated 24 January 1995 (48/36 of process) in which Dr Mackay had advised Mr Young that he did not think that the deceased would be able to take part in a Disciplinary Hearing until the doctor informed Mr Young to the contrary. The pursuer sought an adjournment of the hearing but that was refused. The pursuer confirmed his willingness to remain and to report the proceedings to the deceased but was unable to make detailed comments because he had been unable to obtain adequate instructions due to the deceased's ill health. By letter dated 10 March 1995 (48/40 of process) Mr Young wrote to the deceased advising him that the Disciplinary Panel had concluded that he was guilty of gross misconduct warranting summary dismissal. The four grounds previously referred to had been established and annexed to the letter was a summary of the panel's consideration of each of these grounds. The decision letter advised the deceased that if he intended to appeal against the decision he must advise Mr Young in writing by Monday 20 March 1995 and, if so, the appeal would be held on 22 March. The deceased sought and was granted a postponement of the appeal hearing. A postponed date was fixed for 19 April. On 12 April the deceased sought to defer the appeal hearing on the grounds of ill-health. On 19 April at a special meeting of the Board of Directors the defenders refused to defer the appeal hearing and the Review Panel ratified the decision to dismiss the deceased.
Discussion
First Issue
[22] The first issue for me is whether it has been established that the deceased behaved in such a way as to justify summary dismissal. Was the deceased in breach of Clause 10 of his contract of employment with the defenders (48/47 of process)? In particular was the deceased guilty of conduct tending to bring the company or himself into disrepute (Clause 10.1(b)) or did the deceased commit any serious or persistent breach of any of his obligations to the company under the contract (Clause 10.1(c))? Although the defenders only relied upon Clause 10.1(b) in their letter of dismissal, Mr Connal relied upon Clause 10.1(c) in his closing submissions. I did not consider that this difference was significant because the conduct alleged might constitute a breach of either of these provisions. It was a matter of agreement that, unlike proceedings before employment tribunals, questions such as the reasonableness of the defenders' conclusions that the deceased was in breach of his contract or about the fairness of the procedure adopted by the defenders were not essential to the issue for my determination. On the other hand it was accepted that such questions might be relevant for the limited purpose of assessing the evidence of particular witnesses and determining the weight to be attached to such evidence. Before considering the evidence about the disciplinary procedures for that limited purpose, it may be appropriate to comment on the role of Carthy. [23] It was not disputed that a number of anonymous letters had been written to various people alleging corrupt practices by a number of employees of the defenders, including the deceased. It is fair to say that the deceased was the target of the majority of the accusations. As I have already indicated the allegations were fully investigated at different times by the defenders, by internal auditors of DFE and by Coopers and Lybrand. By far the majority of the allegations against the deceased were established to be malicious. To that extent the anonymous letters, and ultimately the formal complaint by Carthy to the NAO on 31 August 1994, should be seen as nothing other than a scandalous and vindictive attack upon the integrity of the deceased. I am satisfied that the anonymous letters were written by Carthy despite the fact that in the first and third anonymous letters (48/2 and 48/7 respectively) he sought to divert suspicion by implicating himself. The first letter was written on company notepaper at a time when Carthy was still employed by the defenders. In that letter he stated:"The Administration Director, Ron Carthy, is incompetent. He gained his position because he is/was intimately involved with Harrison's second wife and hence knows where skeletons are hidden".
In the third letter reference was made to the date of an invoice for a dinner being changed from 1 January 1992 to 11 January 1992. This allegation was repeated in Carthy's statement to NAO on 31 August 1994 (paragraph 22). In that statement Carthy alleged that the invoice had been changed prior to its presentation for payment to Mr Morrison, the Finance Director. The investigation by Coopers and Lybrand into this allegation disclosed that Mr Morrison, Mr Ward and the deceased's secretary were all aware in advance of the event that the deceased intended to have a business dinner on 1 January to discuss the possibility of sub-letting heritable property which was surplus to the defenders' requirements. They were also aware that Carthy was to attend because such matters were his responsibility. Following the dinner Mr Morrison recalled reviewing the deceased's expenses claim on 13 January 1992. They included a receipt from the Loch green House Hotel dated 1 January 1992. He had a particular recollection of the receipt because prior to that date he had not heard of the hotel although he had lived in Ayrshire until 1972. Following the third anonymous letter Mr Morrison discovered that the receipt was missing. The photocopy of the altered receipt attached to that anonymous letter resulted in Mr Morrison concluding that the original receipt had been stolen and tampered with. I respectfully agree with the observations of Coopers and Lybrand at paragraph 248 of their final report that there was no reason for the deceased to alter the date from 1 January to 11 January in circumstances when it was already known that he would be entertaining people on 1 January for business purposes. The only plausible explanation for the missing receipt and its subsequent alteration is that, as part of his malicious campaign against the deceased, Carthy stole the receipt and altered it. I also considered that it was significant that having signed and delivered his statement to NAO Carthy refused to co-operate with Coopers and Lybrand in their investigation and, in particular, refused to permit his allegations to be subjected to scrutiny. In his evidence the deceased made certain criticisms of Carthy although his submission dated 17 October 1994 to Coopers and Lybrand (48/23 of process) contained more detailed observations about Carthy's character and conduct, including various misdemeanours and malpractices by Carthy. It is unnecessary for me to rehearse these. Whatever reason Carthy had for bearing a grudge against the deceased, nothing could justify his malice exemplified in the anonymous letters and the formal statement to NAO. Carthy's motivation is not an issue which I need resolve. It is sufficient for present purposes to conclude that Carthy is incredible and unreliable. In determining whether it has been established that the deceased was in breach of Clause 10 of his contract of employment I place no reliance upon Carthy's allegations, except to the extent that there is independent credible and reliable evidence supporting them.
[24] Although it was acknowledged by senior counsel for the pursuer and by the solicitor advocate for the defenders that issues of fairness or reasonableness of the defenders in deciding to dismiss the deceased are of secondary importance, a review of the conduct of Mr Young in the disciplinary process may have some bearing upon his credibility and reliability and upon the weight to be attached to his evidence. Following the receipt by the defenders of the first draft report dated 1 December 1994 from Coopers and Lybrand Mr Young sent a copy of the report to the deceased in hospital and invited his comments on those parts of the report which appeared to be critical of the deceased's conduct. Despite being aware that the deceased had been advised to remain off work and was unable to address these issues, Mr Young wrote to the deceased on 16 December 1994 (48/27 of process) expressing the Board's concern about the criticisms of the deceased's conduct in the draft report. In that letter Mr Young also advised the deceased that the question of his resuming his duties as Chief Executive was "necessarily conditioned not only by your state of health but also by your ability to answer satisfactorily the criticisms as reported and especially on whether you can show that the conclusions are invalid". On 29 December 1994 Mr Young wrote to the deceased enclosing a revised draft report from Coopers and Lybrand. That letter referred to the Board having read the opinion of leading counsel relating to the deceased's alleged conduct, which "could well amount to serious misconduct justifying summary dismissal". It also indicated that the Board had "avoided coming to a final view because it has wished you to be given an opportunity to comment and if possible, to rebut". Concern was expressed about the effect on the company of the continued absence of a permanent Chief Executive and the deceased was required to respond "well before" 20 January 1995. Despite the existence of a medical certificate confirming the deceased's unfitness to return to work until at least January Mr Young wrote to the deceased on 10 January 1995 enclosing the final version of the Coopers and Lybrand report and also a copy of his earlier letter dated 29 December to which he had not received any reply. It seemed to me that undue pressure was being put upon the deceased at a time when he was seriously ill. On 14 January 1995 Mr Young wrote to Dr Mackay requesting a medical report. Without waiting for that report he wrote to the deceased on 19 January 1995 advising him that the Disciplinary Hearing had been fixed for 1 February 1995. On 24 January 1995 Dr Mackay advised Mr Young that the deceased was unfit to attend such a hearing and he undertook to notify Mr Young when the deceased's health stabilised and he was able to take part in a Disciplinary Hearing. On 16 February 1995 Mr Young advised the deceased that the hearing had been postponed until 3 March. The deceased was unable to attend that hearing for reasons of ill-health and a medical certificate was produced by the pursuer. Nevertheless the hearing proceeded and the deceased was dismissed for the reasons already mentioned. [25] The Disciplinary Panel comprised Mr Young, Mrs Bennigsen and Mr Burnett, two non-Executive Directors of the defenders. Although Mr Burnett gave evidence in the present action, Mrs Bennigsen was not adduced as a witness. As regards the proceedings before the Disciplinary Panel I preferred the evidence of Mr Burnett to that of Mr Young. It seemed from the evidence of Mr Burnett that Mr Young, as Chairman of the meeting, dealt with the question of the medical certificate. Mr Young had prepared in great detail for the meeting and, according to Mr Burnett, he led the meeting. Mr Burnett was aware that the Chairman had come to the conclusion that the deceased had misled him personally. According to Mr Burnett the function of the Chairman was to deal with the Chief Executive and he understood that the Chairman was taking the process forward. He had no experience of disciplinary matters. He was aware that the Chairman had considerable experience of such matters both as a member of the Employment Appeal Tribunal and as a Director of Human Resources in a large public company. He was also aware that the Chairman had taken legal advice. [26] The appeal hearing took place on 18 April 1995. The special meeting of the Board of Directors on that date convened at 12 noon and was chaired by Mr Young. The other directors in attendance were Mr Burnett, Mrs Bennigsen, Sir Eric Ash, Mr Kanter, Mr Morrison and Mr Ward. From the minutes of that meeting (48/44 of process) it is clear that Mr Young tabled a letter from the deceased requesting a postponement of the appeal hearing on the grounds of ill-health. Thereafter although the Chairman acknowledged that it was open to the Board to agree a further postponement he highlighted two factors, namely his letter dated 24 March 1995 to the deceased advising the deceased that there could be no further postponement beyond the April Board meeting in the absence of any new and compelling reasons and the need for the company to commence the process of briefing recruitment consultants in May to recruit a replacement Chief Executive. Paragraph 2.3 of the minute records:"The Chairman noted that it would be difficult for the Company to agree to a further postponement of an appeal hearing. If, for these reasons, no postponement could be allowed, the Board members who were not involved at the Disciplinary Hearing of 3 March 1995 should review the disciplinary process".
The Board refused any postponement of the appeal hearing. Although Mr Kanter thereafter assumed the Chair and the remaining Directors, who had not been involved in the earlier Disciplinary Hearing, purported to act as a Review Panel, Mr Young and the two other members of the earlier Disciplinary Hearing remained in the room. Moreover, Mr Young outlined to the Review Panel the history of correspondence between himself, on behalf of the Board, and the deceased prior to 12 April 1995. Mr Young, Mr Burnett and Mrs Bennigsen remained throughout the deliberations of the Review Panel, which decided to ratify the decision of the Disciplinary Panel. The meeting closed at 1.00pm. It seemed to me that the procedure adopted was unfair. In particular the presence of the members of the Disciplinary Panel during the deliberations of the Review Panel might be perceived as bringing undue influence to bear upon the Review Panel to ratify the earlier decision. This was particularly so in the context of Mr Young being perceived as the expert in employment matters, the person who had been involved throughout, the person who claimed to have been misled by the deceased and the Chairman of the Board of the defenders. The brevity of the deliberations of the Review Panel does nothing to allay such concerns. It also appeared unusual, to say the least, that the Chairman was invited to outline the history of correspondence between himself and the deceased when presumably copies of the correspondence could have been made available to each member of the Review Panel to consider in advance of the hearing. By allowing Mr Young to detail and comment upon the correspondence the Review Panel exposed itself to criticism that it may have been influenced by him. The reference by Mr Young to the deceased's letter dated 12 January 1995 as "a comprehensive six page letter" conveying the deceased's "preliminary" views on the Coopers and Lybrand report seemed to me to be tendentious in the context of an initial response to a 78 page report, including appendices. Moreover the narrative given to the Review Panel simply records that on 3 March 1995 the Disciplinary Hearing was held and a comprehensive note of that hearing was produced. The attention of the Review Panel was not directed to the terms of the medical report on the deceased's condition. In particular the members of the Review Panel were not told of episodes of confusion lasting for a day or two at a time over a period of at least one year prior to November 1994 or that in March 1995 the deceased was still having occasional episodes of loss of consciousness and awareness despite medication. Mr Young at best failed to appreciate the true insignificance of the deceased's health problems. This is illustrated by paragraph 6.7 of the Minutes of the Disciplinary Hearing (48/39 of process), which is in the following terms:
"Mr Young observed that, whilst the medical evidence tabled by Mr Watson would be taken into account by the Panel, there had been no indication at a working level of Mr Harrison's medical condition prior to the date his sick absence began".
Even if that statement is accurate, it ignores the sole and conscience medical report of a consultant physician to the effect that the deceased was suffering from attacks of loss of consciousness for a long time prior to the commencement of his absence from work. It is hardly surprising that in its discussion in Mr Young's presence the Review Panel simply observed that in January 1995 the deceased had produced "a detailed six page letter" dealing with the issues raised by Coopers and Lybrand. No reference is made in the record of its discussions about the possible effect of the deceased's medical condition on his ability to respond to the allegations with accuracy.
[27] It was clear from the evidence of Mr Young and Mr Burnett that from October 1994 the defenders experienced operational problems associated with a new computer system which had been introduced. The new system failed and the effect of the failure was that tens of thousands of students had to wait for long periods before receiving their loans. The company was inundated with telephone calls and letters and was unable to cope with the pressure. Questions were asked in Parliament. The media was critical of the company. Mr Young described these as enormous problems for the defenders that the defenders had to take steps to resolve. They needed to reintroduce leadership, clarity and stability and needed to know how the issue of having a full time Chief Executive in harness was going to be resolved. The impression I had of Mr Young was that he was at pains to avoid any personal criticism in 1994 and subsequently. It would be apparent to him that the removal of the deceased from office would clear the way for the appointment of a replacement Chief Executive, thereby enabling the defenders to address their operational problems and might also have the effect of absolving Mr Young of any criticism. [28] I did not find Mr Young to be a convincing witness. At times he was defensive. At other times he was evasive. For example, paragraph 31 of Appendix D of the first report by Coopers and Lybrand dated 1 December 1994 records that the authors were of the opinion that in October 1992 the deceased must have been asked by Mr Young to give an account of the house move by the deceased's son. They record his response as reported by Mr Young and conclude "we think that the Chairman must have been misled by Mr Harrison". The equivalent paragraph in the second report dated 19 December 1994 is paragraph 313. That records that in October 1992 the deceased was asked by Mr Young about this matter. The sentence about the deceased's response as reported by Mr Young is identical but the final sentence is that "the Chairman has confirmed to us that he was misled by Mr Harrison". On 16 December Mr Young wrote to the deceased to the effect that he understood that "the draft report is being uprated". In his letter dated 29 December 1994 to the deceased Mr Young referred to the existence of an opinion of leading counsel engaged by DFE which the Board had read. When he was asked about these matters he stated initially that he could not say what "uprated" meant although it was a word used in his letter. Shortly thereafter he claimed that it was not an unusual word for him to use and it simply meant a more up to date version of the report. He was unable to explain why he had not said this in the first place. More significantly his answers in relation to the other matters were unconvincing. In relation to counsel's opinion he became aware of it from Tim Lancaster the Permanent Secretary at DFE. He stated that he certainly saw the opinion. He said that he "could have been given it". When he was asked when he had seen it, he avoided the question and simply said that he seemed to remember the opinion was quite lengthy. He claimed to have glanced at the opinion. Thereafter he stated that he had read the opinion within the last couple of months prior to his giving evidence. Later on in his evidence he stated that, before he advised Coopers and Lybrand that he had been misled by the deceased about Barry's house removal, he was aware that leading counsel had advised that misleading the Chairman of the defenders or misleading the Public Accounts Committee would justify summary dismissal. In relation to the changes between the first and second drafts of the report by Coopers and Lybrand to which I have referred, he was asked whether he had had any meetings with them. His response was that he could recall one letter but he did not know whether it was written between the first and second draft or between the second draft and the final report. When confronted with the second draft he accepted that it must have been written between the first and second draft. He subsequently disclosed that he had a copy of his manuscript letter at home and had briefed himself about this matter before giving evidence. In these circumstances his evidence on this matter was all the more surprising. The impression created by his evidence was that he had simply written to Coopers and Lybrand about this matter whereas Mr Coleman, the partner responsible for the investigation, testified that Mr Young came to see him about a week after the first draft report. The meeting was not at the instigation of Coopers and Lybrand. Mr Young brought documents with him including copies of the minutes of the meeting on 27 October 1992 which had been prepared by a lady from DFE. Mr Young told Mr Coleman that he had been misled by the deceased. Mr Burnett also stated that he was aware that Mr Young had gone to the offices of Coopers and Lybrand and had dealings with them directly. I formed the impression that Mr Young was neither credible nor reliable and was seeking to withhold from the Court the extent of his involvement with Coopers and Lybrand. He was clearly someone who kept meticulous records. He had consulted his records prior to giving evidence. Before he was questioned about the matter, it seemed to me that he was acutely aware of the significance of the difference between the first draft and the second draft report relating to his being misled. I considered it significant that he had chosen to visit Coopers and Lybrand following the first report at a time when he was aware of the opinion of leading counsel about the possible consequences for the deceased of a finding that he had misled the Chairman of the defenders. By 16 December 1994 he was aware that a revised report was being prepared and he confirmed that by the end of December he had formed the view that the deceased had deliberately misled him. He accepted that it would be difficult for him to change his view about that matter, even although Coopers and Lybrand may have altered their view if they had heard the deceased's explanation. [29] Mr Young also confirmed that in January 1995 he understood the terms of the letter from Dr Mackay and appreciated that the deceased was unfit to participate in a Disciplinary Hearing. However, he went on to state that Dr Mackay would not have been aware of issues causing enormous problems for the company that the company had to take steps to resolve. Thereafter he referred to the operational problems which the company had experienced after October 1994, to which I have already referred. Apart from the need to resolve the issue of having a full time Chief Executive in harness, the company also required to resolve the issue of allegations of impropriety which had attracted adverse comment in the media. It appeared to me that by advising Coopers and Lybrand that the deceased had misled him, Mr Young ensured that the report available to the Disciplinary Panel contained a crucial finding which, on the basis of counsel's opinion, would justify the summary dismissal of the deceased. Such a result would resolve the two issues which were concerning the defenders and might also divert criticism from the witness. In the result it appears that he did not escape criticism from the Public Accounts Committee. [30] Although the decision to dismiss the deceased was taken by the Disciplinary Hearing it is clear that Mr Burnett expected Mr Young in his capacity as Chairman of the defenders to deal with the matter. His impression was that Mr Young had prepared in great detail for the meeting. He introduced the meeting and led the meeting. Mr Burnett was unable to recollect whether he had seen either of the first two draft reports from Coopers and Lybrand. He confirmed that the final version of the report had been provided to him prior to the hearing. While I have no concerns about the integrity of Mr Burnett and I accept his evidence to the effect that he would not have agreed to the dismissal of the deceased if he had thought there was something untoward about such a decision, it must be appreciated that he was guided by Mr Young. He relied upon Mr Young because of his expertise in employment matters and because he was Chairman of the defenders and, as such, had primary responsibility for dealing with the Chief Executive. Moreover the final report referred to the Chairman being misled by the deceased.Reasons for dismissal
[31] It was accepted by the solicitor advocate for the defenders that it is for the defenders to justify their dismissal of the deceased. Failure to establish that the deceased was guilty of conduct tending to bring the company or himself into disrepute or that he had committed any serious or persistent breach of any of his obligations to the company under his contract of employment would result in a breach of that contract by the defenders with consequences in damages. [32] The first purported reason advanced for the dismissal of the deceased is stated as "poor judgement and unwarranted extravagance in relation to personal expenses". The letter of dismissal (48/40 of process) explained that the poor judgement alleged related to the deceased considering it reasonable to make three specific meals a charge on the company. The sums involved were not large and the issue of extravagance related to the validity of the three claims as opposed to any lavishness of the hospitality paid by the company. In his evidence Mr Young accepted that this matter, even if established, would not have justified dismissal of the deceased. The only matter which concerned Mr Burnett was the alleged deception relating to the flat move by the deceased's son, which was the fourth reason given for dismissal. Even in that regard Mr Burnett stated that he was not concerned about the alleged deception within the company. It was the fact that the matter had gone beyond the company and had involved others which caused him concern. In his closing submission the solicitor advocate for the defenders accepted that this first purported reason was not relevant to the question of dismissal. The only relevance of the evidence about this matter related to its effect on the assessment of the deceased's evidence and the position adopted by him in regard to these matters. I agree that, if it were established, the alleged poor judgement and unwarranted extravagance in relation to personal expenses would not warrant a conclusion that the deceased was guilty of misconduct justifying his summary dismissal. In view of the position adopted by the only two members of the Disciplinary Panel who were adduced as witnesses, it is difficult to comprehend why the Disciplinary Panel relied upon their findings on this issue to justify the conclusion that the deceased was guilty of gross misconduct. Although it is a matter of concession that this issue is no longer relevant except for the limited purpose suggested by Mr Connal in his closing submissions, it is nevertheless appropriate that I should deal with it at this stage. [33] In relation to each of the matters specified by the defenders as justification for the deceased's dismissal I asked the Commissioner to report to the Court as to the demeanour of the deceased. In respect of this matter the Commissioner's report was:"No comment - the matter did not appear to be particularly controversial".
On other matters the Commissioner considered that the deceased was credible. Mr Young considered that the deceased was essentially an honest person. In relation to one of the other issues considered by the Disciplinary Panel Mr Young stated that they had concluded that the deceased was "uncharacteristically dishonest". In assessing the credibility of the deceased both as a witness and in respect of his responses to Coopers and Lybrand between October and November 1994 and to Mr Young on 12 January 1995 allowance must be made for his medical condition. At the date of the Commission the deceased was terminally ill and at the date of his dealings with Coopers and Lybrand as well as at the date of his response to their provisional conclusions it is clear that he had been ill for more than a year suffering from attacks of loss of consciousness followed by confusion and headaches lasting for as often as a day or two at a time. Despite the views of the defenders to the contrary, some allowance should be made for the deceased's medical condition and I consider that some of the discrepancies in detail of various events can be explained because of his condition. Essentially I considered the deceased to be a credible witness.
[34] The first of the meals identified in the Coopers and Lybrand report was a dinner in an Ayrshire hotel with a prominent Scottish businessman in October 1991. The cost of the dinner was £51.20. The businessman was interviewed by Coopers and Lybrand and he confirmed that he had had a meal with the deceased at the hotel in October 1991 although his recollection was that it was on a different day than the one specified by the deceased. I did not consider that the difference in dates was material particularly in view of the fact that the businessman was being asked more than 3 years after the event about it. The position of the deceased was that during the early life of the company there was considerable animosity towards it and it was part of the deceased's function to change that. Part of the strategy was to entertain influential members of society from a cross section of business, academia and the media. The businessman who was entertained on this occasion was a prominent Scottish businessman. Contrary to the views of the members of the Disciplinary Panel I do not consider that the nature of the business conducted by the businessman was relevant. While it is obvious that it was desirable for the company to seek to influence opinion within the financial sector, it seems to me that it was also necessary to extend hospitality to others, including prominent members of the business community as a whole, if there was to be any prospect of effecting a change in society's attitude to the defenders. Indeed this seems to have been accepted by the defenders because, as was observed in the cross examination of the deceased, the defenders approved of his having entertained the Chairman of Scottish Brewers. I am satisfied that the meal in October 1991 was part of the defenders' campaign to influence public opinion in their favour and as such was a legitimate expenditure by the deceased on behalf of the defenders. [35] The second meal involved entertaining friends, Mr and Mrs Moncreiff, on 1 January 1992 at an Ayrshire hotel. Apart from the two friends, who were husband and wife, Carthy also attended. Although he was Administration Director, Carthy was not on the Board of the defenders but he had responsibility for property. At that time the company had property in Bothwell Street which was surplus to requirements. In particular, there was a banking hall which comprised a large open space to which the public had access. Mr Ward, who was then the Loans Administration Director but not a member of the Board of the defenders, recalled a discussion in or about December 1991. Prior to that there had been extensive discussions about getting rid of the space which was surplus to requirements and in December 1991 the deceased said that friends were visiting him at New Year. The husband was in business and had contacts in the retail trade. Although Mr Ward testified that he did not think that the meal was a legitimate business event the report from Mr Morrison, the Finance Director, to Mr Young, as recorded in the Coopers and Lybrand report, was to the following effect:"Colin Ward also confirmed that he knew in advance that Ron and his wife were planning to entertain a business associate through whom he, Ron Harrison, was trying to negotiate a sub-let for our banking hall on the ground floor. Ron Harrison's secretary made the dinner booking for 1 January 1992 which included the Harrisons, Carthy and their business guests".
Mr Moncreiff testified that he and his wife were friends of the deceased and his wife. They had been invited to spend New Year with the deceased and his wife. This had never occurred before. On 1 January 1992 they went to a hotel for a meal along with Carthy. He could not recall the nature of any conversations which took place more than 10 years ago. However, he confirmed that the deceased discussed property with him on occasions and he may have done so on this occasion. Mr Moncreiff is a chartered surveyor and had contacts through estate managers and other surveyors who dealt with commercial property. He was more active in the commercial property scene at that time than he is now. The deceased admitted that he was friendly with Mr and Mrs Moncreiff. At that time DFE was the subject of criticism for incurring the expense of leasing a substantial building in Bothwell Street for the defenders. Government ministers were "going crazy, concerned about the criticism of the department". There was a lot of excess space at that time. People were going frantic because they had tried everything. Mr Moncreiff was the senior partner of a property company and he dealt with commercial property mainly in Edinburgh and Glasgow. In December the deceased advised other executives that he intended to invite Mr Moncreiff and his wife for New Year and to include Carthy because he was in charge of property disposal and acquisition. It was arranged that everyone would stay at the deceased's home overnight and go to dinner at the hotel the following day. The event was entered in his diary. The deceased's secretary contacted the hotel and booked dinner. He would not have invited Carthy if there had not been a business element. His wife prepared the meal on Hogmanay and they had dinner at the hotel the following day. On 2 January 1992 he and Carthy spoke to Moncreiff about the disposal of the buildings. In the course of discussions Carthy announced that he had to go to visit his mother. The deceased followed up the meeting by contacting Mr Moncreiff to be told that Carthy had never been in touch with him. He reprimanded Carthy for that. As well as mentioning the event in advance to fellow executives the deceased spoke to the then Chairman to advise him of his plans. In his evidence the deceased was confused when he thought that the Chairman at that time was Mr Young. In his report the Commissioner stated that he formed the impression that the deceased sincerely thought that the claim was one he was entitled to make. I accepted the evidence of the deceased that he had spoken with the Chairman of the company prior to the event and advised him of his intentions to entertain Mr Moncreiff at New Year. I also accepted that the matter had been fully discussed with other executives in the company and that everyone was aware that it was intended that the expense of the dinner would be met as a business expense. I also accepted the deceased's evidence that Carthy would not have been invited to his home or to the meal had it not been for his responsibility for the company's property. Moreover the Finance Director, who had prior knowledge of the event, did not question the expenditure. I do not consider that the deceased displayed poor judgement and unwarranted extravagance in this case when the following factors are considered:
(a) the pressure upon ministers and the department relating to the company's property;
(b) the prior involvement of the Chairman and the other executives of the defenders;
(c) the fact that Mr Moncreiff had an expertise relating to commercial property; and
(d) the fact that the deceased incurred personal expenditure in entertaining Carthy and Mr and Mrs Moncreiff on Hogmanay.
"We have seen no clear evidence that Mr Harrison knew that day that SLC staff would be absent from the office and would be assisting with his son's move",
I have concluded on the basis of his evidence that the deceased was unaware of these facts. I also accept that the deceased did not directly or indirectly instruct any staff to be involved. On the contrary he gave specific instructions to Mr Conway not to be involved during company time. The basis for the allegation that the deceased was being economical with the truth about this matter depended upon the fact that he signed overtime sheets for Mr Conway and Mr Ashwood. I accept the conclusion in the Coopers and Lybrand report at paragraph 312 that this was clearly an exception. On that basis Coopers and Lybrand concluded that the deceased must have asked why he was being asked to sign the overtime claims and that he must have known that the time was spent assisting in his son's move. I disagree with that conclusion. In the first place Mr Conway's overtime sheet records overtime between 5.30pm and 9.00pm. The reason for the overtime is shown as "MD". The investigations by Coopers and Lybrand disclosed that the deceased's engagement diary disclosed that he was at a restaurant at the Concert Hall in Glasgow. Mr Conway recalled collecting the deceased from that venue. Even if he had taken an afternoon's leave to enable him to assist with the removal he would have acted as driver for the deceased in the evening and would have claimed overtime. Louise Wright, the Personal Assistant to the deceased, confirmed that Mr Conway frequently spoke with the deceased about his overtime sheet. She was unaware of the system for signing such sheets and did not know whether the deceased signed them. The overtime sheet which was signed by the deceased for Mr Conway does not appear on the face of it to relate to any duties other than for the Managing Director. The overtime sheet relating to Mr Ashwood discloses that he worked from 4.00pm until 9.00pm on the same date on "detached duty, Chief Executive's office". The deceased accepted that he had erred in signing this document. However I believed his evidence that it was a genuine error and was not part of a fraudulent scheme to steal a few pounds from the defenders to assist with his son's removal. Unlike Mr Young I do not consider that the deceased was being uncharacteristically dishonest. Although there was no satisfactory explanation of the circumstances in which he came to sign either of the overtime forms, I am not persuaded that the deceased committed perjury. Apart from being highly regarded as an honest man I consider that I am entitled to take into account the circumstances in which he was giving evidence. The deceased was terminally ill and was aware of that fact. He died approximately 6 weeks after the third day of the commission before his evidence was concluded. While the conclusion in the Coopers and Lybrand report about the deceased's knowledge of the involvement of the defenders' employees in his son's house removal is based upon inference, the authors of that report did not have the advantage of the deceased's sworn testimony about this matter. In all the circumstances I am not satisfied that the defenders have established that the deceased exaggerated or was economical with the truth.
[44] The final purported reason advanced for the dismissal of the deceased was that he misled the Chairman, the Board of the defenders, DFE, NAO and the Public Accounts Committee regarding his son's flat move. The evidence relied upon by the defenders includes some of the evidence to which I have referred in the context of the previous purported reason. I accept the submission of Mr Connal to the effect that the deceased was aware of the fact that his son was moving into a new flat even although at that time his son did not live in family with him. It was clear that the deceased and his son had a normal relationship for a father and son and frequently spoke to each other socially. I also accept that the deceased provided the cheque to pay for the van hire, but I have concluded that Barry Harrison repaid his father. As already indicated I rejected any suggestion that the deceased was aware that any staff had been instructed to help with his son's move. The extent of his awareness was that Mr Conway intended to hire the van on behalf of the deceased's son. The deceased instructed Mr Conway not to be involved during company time. I have already rejected the suggestion that the Board of the defenders was deliberately misled by the deceased's statement on 27 October 1992. The defenders also purport to rely upon a letter written by the deceased to Mr Young on 16 March 1993 (48/11 of process), particularly upon the following passage:"Barry Harrison hired a van for his flat removal which was conducted at his own expense. The allegation that the move was made at a weekend and incurred overtime expense to SLC is untrue".
In the sense that Barry Harrison paid for the hire of the van, the first part of the first sentence is accurate. With the benefit of hindsight it appears that the removal was not conducted entirely at Barry's own expense. The first part of the second sentence is also accurate because the move occurred on a Friday. The second part is not because it appears that overtime expense to SLC was incurred. The next statement upon which the defenders place reliance was made by the deceased shortly prior to 31 March 1993 and was in the following terms:-
"Mr Harrison has stated that his son paid the rental invoice, and the Finance Director has confirmed that the company did not pay this bill. Mr Conway gave some limited assistance to Mr Barry Harrison in the move during office hours, but no overtime was paid. It has been made clear to the company by the Chairman and the Chief Executive that this minor malpractice should not have occurred and must not be repeated".
The first and third sentences are accurate. In relation to the second sentence there are two issues. The first is the time of the move and the second relates to whether overtime was paid for Mr Conway's services in the removal. As far as the time of the removal is concerned, Barry Harrison could not assist but Messrs Conway, Stuart Brown and James Alexander all told the investigators at Coopers and Lybrand that Messrs Conway and Ashwood were absent during the afternoon whereas Mr Ashwood testified that the removal was after working hours. Coopers and Lybrand concluded that it was outwith normal hours and the entry in Mr Ashwood's overtime sheet would tend to support that conclusion. I did not consider that the evidence of Mr Rae, the Office Services Manager, was of any assistance. The source of his evidence was Mr Alexander, the Mail Room Supervisor, who was interviewed by Coopers and Lybrand but did not give evidence before me. Contrary to the submission by Mr Connal, Mr Rae's evidence was not a contemporaneous account of what he had been told. Mr Rae accepted in cross examination that he could have been told about the matter 2 weeks after the event. Although Mr Alexander was clearly mistaken when he thought that Stuart Brown was also involved, I have come to the conclusion that the removal was probably during normal office hours. I have also concluded that the overtime paid to Mr Conway on that date related to his evening work as a driver. The final communication relied upon by the defenders is contained in a letter from the deceased to Mr Young dated 8 April 1993 in which he stated:
"Mr Conway, on a personal basis, assisted Mr Barry Harrison with his move in the afternoon of Friday 27 March 1992 for which purpose Mr Conway took a half day's leave". (48/14 of process).
Following his note dated 31 March 1993 the deceased had rebuked Mr Conway for causing trouble but Mr Conway had advised him that he had been entitled to leave and had taken half a day's leave to assist with the removal. There is independent evidence that Mr Conway had not used his entitlement for annual leave by that date. The investigation by Coopers and Lybrand disclosed that the last entry on the relevant record was on 26 February 1992. At that date Mr Conway was still entitled to one day's annual leave and it was not carried forward to the next financial year. At the time each of the statements were made by the deceased I am of the opinion that he believed them to be true. Although he had signed the overtime sheets, and he accepted that he was in error at least in relation to Mr Ashwood, it was not clear from these documents that they related to the house removal. Nor is there any evidence that he was advised of that fact. In the absence of any positive evidence to the contrary I am not prepared to impugn his integrity. Nor do I consider that the evidence results in the necessary inference that the deceased must have known that members of staff were employed at company expense to assist his son. If people were misled, it was due to genuine error. I do not consider that any of the statements were made with the necessary intention to mislead or with such recklessness as would merit a conclusion that the deceased was guilty of gross misconduct.
[45] In the whole circumstances I am not satisfied that the defenders have established that the deceased was in breach of either Clause 10.1(b) or Clause 10.1(c) of his contract of employment. There was no justification for his summary dismissal.Second issue
[46] The second issue for my determination is the amount of damages payable to the pursuer as a result of the defenders' breach of contract with the deceased. Competing submissions were advanced on behalf of the pursuer and defenders but parties were agreed concerning the quantum of damages once I had determined the basis of the calculation. [47] The factual basis for the pursuer's claim was not in dispute. The deceased had a fixed term contract with the defenders ending on 9 January 1998 when he would have attained the normal retirement age of 64. The deceased became unwell and was absent from work continuously from 22 November 1994 by reason of ill-health. He remained in ill-health until his death on 18 January 2000 and would have been unable to return to work at any time prior to his death. In these circumstances in terms of Clause 5.2 of the contract of employment the deceased was entitled to payment of his salary at the full rate (less any social security or other benefits payable to him) during his period of absence from work because of sickness up to a maximum of 26 weeks. Thereafter he would have been entitled to benefit in terms of Clause 5.4 of the contract which is in the following terms:"The Company will maintain and continue to maintain for at least a period of this Agreement the Permanent Health Insurance Scheme which is currently in force for the benefit of employees of the Company including the Executive, the benefits of which are set out in the Schedule".
Paragraph G of the Schedule relates to the Permanent Health Insurance Scheme and provides:
"The Permanent Health Insurance Scheme ('PHI Scheme') provides a benefit level of 75% of salary (less state benefits) indexed at the rate of 7.5% per annum until normal retirement age (64). The PHI Scheme will also maintain pension contributions at the benefit level".
"unless terminated in the interim by the Company under Clause 10.1 hereof or by either party giving to the other twelve months prior written notice at any time prior to 10 January 1997".
Compensation is for failure to give notice and accordingly the pursuer is entitled to payment of what the deceased would have received during the period of notice which should have been given (Johnson v Unisys Ltd (2001) UKHL 13). Applying that test the deceased would have received the balance of his 6 months full pay followed by his entitlement to payments in terms of the Permanent Health Insurance Scheme instituted by the defenders. Mr Connal submitted that the basis of the pursuer's claim in terms of Clause 5.4 was a claim for benefits under the Permanent Health Insurance Scheme. That scheme (41/1 of process) should be construed as part of the contract. The benefits to which the deceased was entitled are benefits under the scheme which provides that entitlement to payment ends on the termination of employment. For the present purposes that is at the end of the permissible written notice. Thus, the amount of damages should be restricted to the agreed amounts payable to the pursuer if the deceased had been given one year's notice on 10 March 1995 with any payments to him under the Permanent Health Insurance Scheme or otherwise ceasing on the expiry of that notice.
[50] Having considered the competing submissions it seems to me that the terms of the contract permitted the defenders to terminate it by giving the deceased 12 months written notice. Applying the general rule that in an action for breach of contract a defender is not liable for not doing what he is not bound to do (Morran v Glasgow Council of Tenants Associations and Other 1997 SC 279), it seems to me that the defenders' liability is restricted to the benefits to which the deceased would have been entitled if the defenders had terminated the contract after 12 months written notice. The entitlement of either party to terminate the contract by giving to the other party 12 months prior written notice is unqualified. Although paragraph G of the Schedule specifies that the Permanent Health Scheme provides a certain benefit level until retirement age, it seems to me that this is merely intended to indicate the level of benefits payable under the Scheme. The defenders' obligation in terms of Clause 5.4 was to maintain the Scheme for the period of the contract. Clause 5 does not limit the defenders' right to terminate the contract in terms of Clause 2.3. In order to appreciate the limit, if any, of the benefits for employees it is necessary to consider the terms of the Permanent Health Insurance Scheme. It is a matter of agreement that the scheme is contained within 41/1 of process. That document provides that the scheme benefit will terminate upon the member ceasing to be in service (including retirement on pension). [51] I do not consider that Adin v Sedco Forex International Resources Ltd assists in the present case. It seems to me that each case depends upon a construction of the relevant contract. When one construes Clause 5.4 along with the Scheme contained in 41/1 of process, it is clear that the deceased would have been entitled to benefits under the scheme until the termination of the contract upon retirement or under Clause 2.3. In the context of the present case it seems to me that the defenders could not operate indefinitely without a Chief Executive. Indeed the deceased accepted that in his evidence. In these circumstances it is probable that steps would have been taken to replace the deceased as Chief Executive as soon as it was known that he was unlikely to be fit to return to work, even if there had been no outstanding disciplinary proceedings. This is particularly so having regard to the pressure upon the defenders after October 1994. Whether the deceased's employment was terminated in terms of Clause 2.3 or upon his retirement by reason of ill-health he would cease to be entitled to benefit under the Scheme.Decision
[52] For the reasons outlined above I shall repel the first, second and third pleas-in-law for the defenders and shall sustain the second plea-in-law for the pursuer and in respect thereof shall grant decree against the defenders for payment to the pursuer of the sums of (a) £8,867.71 with interest thereon at 4% from 10 March 1995 until 22 May 1995 and thereafter at 8% per annum until payment; (b) £24,596.54 with interest thereon at 4% per annum from 23 May 1995 until 10 March 1996 and thereafter at 8% per annum until payment; (c) £1,551.85 with interest thereon at 4% per annum from 10 March 1995 until 22 May and from 23 May 1995 until payment at 8% per annum and (d) £665.28 with interest thereon at the rate of 4% per annum from 10 March 1995 until 22 May 1995 and from 23 May 1995 until payment at 8% per annum. [53] Meantime I reserve judgment on the question of expenses.
