OUTER HOUSE, COURT OF SESSION   [2009] CSOH 16
	OPINION OF LORD MALCOLM   in the cause   BRIAN WELSH   Pursuer;   against   COWDENBEATH FOOTBALL CLUB LIMITED   Defenders:     ­­­­­­­­­­­­­­­­­________________

 

Pursuer: Waugh; Wilson Terris & Co SSC

Defender: Watt; Maclay Murray & Spens LLP

 

11 February 2009

 

[1] In September 2007 Brian Welsh (the pursuer) was appointed manager of Cowdenbeath Football Club (the defenders). Clause (vi) of his contract of employment provided:

"In the event of either party wishing to terminate this agreement for any reason, save in a situation of gross misconduct of the employee, neither party shall be able to do so until specifically agreeing, as part of the termination:

(a) the notice period to be served and

(b) compensation or settlement (if applicable)."

[2] Unfortunately for the defenders and their fans, at the end of the season Cowdenbeath were relegated to the Third Division, having lost a play-off match to Arbroath. The pursuer went to the USA for a holiday. He avers that while there he became aware of a news article on the BBC website which stated that he had been sacked. It is stated that this came as a considerable surprise to the pursuer. Upon his return his solicitors contacted the defenders and their solicitors. In due course they received a letter from James Methven on behalf of the defenders stating that the pursuer's contract had been terminated at a meeting on 6 June 2008 attended by, amongst others, the pursuer and the defenders' then chairman, Mr Gordon McDougall. Mr McDougall is the pursuer's father-in-law. Mr Methven stated that the discussions centred around the club's poor performance and "slide to relegation." The pursuer's contract had been terminated "because his performance was not what he had assured the club would be delivered over the season" and since he could not prevent relegation. Mr Methven ended the letter by expressing the hope that a meeting with all parties would bring an unhappy chapter for the club and the pursuer to a mutually agreed close. Counsel for the pursuer informed me that in the football world it is common for the wages due under the balance of a contract to be paid to a dismissed manager in order to ensure a smooth transition to the new regime.

[3] A mutual arrangement has not been achieved. The pursuer has raised an action against the defenders seeking damages of £90,000 for breach of contract, that sum representing the balance of the wages due under the remainder of the contract. It is averred that there was no basis upon which the defenders were entitled to terminate the pursuer's employment; further they did not comply with the terms of clause (vi). Initially skeleton defences were lodged on behalf of the defenders. In response to the intimation of a motion for summary decree the defences have been substantially adjusted. However the pursuer maintains his application for summary decree, and I heard counsel for both parties on the matter.

[4] In the adjusted defences it is averred that the pursuer met members of the defenders' board of directors on 6 June 2008 and that at that meeting the contract was terminated. The defenders' pleadings continue to the effect that they were entitled to terminate the contract without notice and without compensation in that the pursuer had been guilty of gross misconduct. In particular on 3 March 2007, while the defenders were playing Raith Rovers, the pursuer uttered foul language at one of the Raith Rovers players. He was removed from the technical area by the match officials. He was banned from the technical area and the players' tunnel for two matches by the Scottish Football Association (the SFA). Further, on 2 January 2008 the defenders again played Raith Rovers. The pursuer uttered foul language at the match officials during the game. He then suffered a four match ban at the hands of the SFA. On 16 February the club played Alloa Athletic. The pursuer was serving the four match ban. At the conclusion of the match in contravention of the ban he stood in the players' tunnel. He behaved in a disorderly manner and had to be restrained by match stewards. He uttered foul language at the coach of Alloa Athletic. He shouted at the match referee. He punched the door of the referee's changing room. Subsequently he was banned from the technical area and the players' tunnel for six matches by the SFA. It is averred that in the foregoing circumstances the defenders were entitled to terminate the contract without notice and without paying compensation. It is also averred that until 1 July 2008 Mr McDougall was responsible for managing the day to day running of the football club. It is said that Mr McDougall did not report the incidents on 3 March 2007 and 2 January 2008 to the other members of the board. It is averred that they learned of them after Mr McDougall's employment had been terminated. (I was informed that on that date Mr McDougall stepped down as chairman).

[5] The pleadings and the discussion at the hearing revealed that the following matters are not controversial:

1. The pursuer's contract was terminated. (There is an issue as to whether the pursuer was informed at the time when this decision was taken).

2. The decision to terminate the pursuer's contract was not taken because of the alleged gross misconduct on the part of the pursuer. The reasons are set out in Mr Methven's letter referred to above. The allegation of gross misconduct based on the SFA bans is now put forward as a justification for the decision to sack the pursuer without notice and with no compensation.

[6] Against this background counsel for the pursuer invited the court to pronounce summary decree in terms of the conclusions of the summons. Failing that, summary decree on the merits should be pronounced, with any proof limited to quantum of damages. It was submitted that there is no basis for the allegation of gross misconduct. In any event it is clear that the pursuer was dismissed for other reasons, all as explained in the news article and Mr Methven's letter. It can be assumed that if the club had not been relegated the pursuer would not have been sacked. There was no mention of any alleged misconduct on the part of the pursuer until it was raised in the context of these proceedings. Counsel submitted that at best this is a poor attempt at after the fact justification. It is neither a genuine nor a plausible defence. Counsel also asked, how can the club claim to have been ignorant of two of the bans concerning their own manager?

[7] Counsel referred to the House of Lords decision in Henderson v 3052775 Nova Scotia Limited 2006 SC(HL) 85. The Committee observed that a judge can grant summary decree only if satisfied that there is no issue which requires a proof for its resolution and that the defender has no defence to all or any part of the action. In other words the court has to be satisfied that in respect of all, or in respect of the relevant part of the action, the defender must fail. It is not enough if the view is that the defender is unlikely to succeed. There must be nothing of relevance to be decided at a proof.

[8] Counsel for the defender submitted that this is an exacting test which the pursuer has failed to meet. On the contrary, a relevant and substantive defence has been set out in the defences as adjusted. He accepted that I could have regard to all available facts, and that my focus is not limited to the pleadings. Counsel explained that there was a change in the ownership of the club in July 2007. He referred me to a print from the Companies House website showing that thereafter, over time, the old board resigned and new directors were appointed. It demonstrates that of the current board, three were appointed in January 2008, and the remaining three members on 9 September 2008. On the same date Mr McDougall, the former chairman, and three other directors resigned from the board.

[9] I was informed that the new owners have limited experience of managing football clubs. They did not take a direct interest in the management of the club till around the time when Mr McDougall stepped down as chairman in July 2008. I was told that this explains the otherwise somewhat remarkable claim of ignorance on their part as to the first and second touchline bans against the club's manager until after Mr McDougall ceased to be chairman. A meeting had taken place earlier in 2008 when the six match ban was raised, though clearly no decision was taken to sack the manager at that time. However counsel submitted that repeated infringements and a series of bans is a different matter from one incident and one ban. At proof the defenders would offer to establish that the current board only became aware of the full story after the pursuer's dismissal. On this basis counsel for the defenders submitted that it was open to the defenders to contest the current action on the basis of alleged gross misconduct, namely the repeated touchline bans and the underlying behaviour which caused them.

[10] Counsel submitted that gross misconduct has no defined legal meaning. It usually relates to conduct going to the heart of the employer/employee relationship and/or something which brings the organisation into serious disrepute. The conduct of the pursuer amounted to gross misconduct which, whatever the reasons for dismissal given at the time, rendered him open to dismissal without notice or compensation. In June the pursuer was not dismissed for reasons of gross misconduct because these matters "were not discovered" until after the sacking. It was submitted that the court cannot conclude that the defenders are bound to fail in this defence to the action.

[11] In support of this submission counsel cited the case of Boston Deep Sea Fishing and Ice Company v Ansell [1888] LR 39 Ch D 339. The defendant was the managing director of the plaintiffs. On their behalf he contracted for the construction of seven boats. Unknown to the company he took a commission from the shipbuilders. Subsequently he was dismissed by the company for various alleged acts of misconduct. At the time of the dismissal the company remained in ignorance of the secret commission. The company was unable to substantiate the stated grounds for dismissal. In a counter-claim the defendant sought, amongst other things, damages for wrongful dismissal. In the meantime the company had learned about the secret commission and relied on it in defence to the claim of wrongful dismissal. It was held by the Court of Appeal that the taking of the commission amounted to misconduct. It was a clear and dishonest breach of duty by the defendant which provided a valid defence to the counter-claim, even though unsubstantiated reasons were given at the time of the dismissal. In other words, knowing what was then known, the dismissal could not be categorised as wrongful, since the defendant had been guilty of misconduct in accepting commission from the shipbuilders.

Discussion and Decision

[12] Counsel for the defenders did I think appreciate that there is a problem with his submission. It is clear that the decision of the Court of Appeal proceeded upon the basis that the acceptance by the defendant of a commission from the shipbuilders was unknown to the company at the time when he was dismissed. Cotton LJ addressed the alternative situation as follows:

"Of course if he knows of the act and still continues to employ him, it might have been held by judges of fact or by a jury that he had condoned it and prevented himself from insisting on the legal right. But assuming that the act of misconduct was unknown, it cannot be said that the mere fact that it happened eighteen months before, prevents the company from insisting upon their legal right to discharge a person who has so misconducted himself. In my opinion, therefore, so much of the order as gives to Mr Ansell on the counter-claim damages for wrongful dismissal must be discharged."

[13] Counsel for the defenders response to this difficulty was to emphasise the change of ownership of the club in July 2007, with the new owners taking little interest in the day to day management of the club until after the pursuer's dismissal. This change in ownership resulted in new directors joining the board in January 2008, and further new directors on 9 September 2008. On that date all of those remaining from the original board, including the former chairman, left the board. The defenders offer to prove that these new directors were unaware of the pursuer's two and four match bans until after Mr McDougall stepped down, though they were aware of the six match ban. It was submitted that this entitles the defenders to seek to prove that though the pursuer was dismissed for reasons which would not allow them to resist the current claim for damages, the club can now point to and rely upon those earlier bans. It is said that, when taken along with the third ban, they justify the club's actions and allow it to refuse to pay compensation to Mr Welsh.

[14] If this line of defence has any prospect of success I must refuse the pursuer's application for summary decree. However in my opinion it is bound to fail, even if the defenders prove all that they hope to establish. My reasons for this are as follows. In contrast to the secret commission in the case relied upon by the defenders, the conduct complained of on the part of the club's former manager could hardly have been more public. All of the fans and no doubt half the population of the area would have been well aware of these matters. At the relevant time the legal personality which is Cowdenbeath Football Club could hardly claim ignorance of the SFA's disciplinary action against its manager, nor as to the reasons for it. On the contrary, whatever the then state of ignorance of new members of the board, and of certain people who in due course would become board members, the corporation, which included its chairman and other officers, was fully aware of the matter. In my view it is wholly unrealistic to claim that the defenders were unaware of the full history of misbehaviour by their manager either at the time, or when they chose to dismiss him for reasons wholly unconnected with those episodes. To be fair, counsel for the defenders based his submission on the lack of knowledge of the individuals who now make up the board, not that of those who represented the club at the time. In my view the club cannot legitimately claim that it dismissed its manager in ignorance of the very public episodes upon which reliance is now placed. No action was taken by the club against Mr Welsh at the time of the bans. By the time of the pursuer's dismissal they were water under the bridge. The defenders' position is all the weaker given that it is accepted that throughout the new directors knew of the final and most serious ban.

[15] The issue must be tested by reference to the legal personality which is Cowdenbeath Football Club Limited and by its knowledge and actions from time to time. Having dismissed the pursuer because of the poor performance of the team, the defenders cannot revisit the matter now by reference to those earlier well known and very public events. The defenders have waived any right to do so. The relevant circumstances in the present case are very different from those relied upon by the Court of Appeal in the Boston Deep Sea Fishing Company case. It can be noted that the discussion of that case and others in the current edition of Chitty on Contract states in paragraph 24 - 014:

"Thus when an employee brings an action against his employer, alleging that he has been wrongfully dismissed, the employer can rely on information acquired after the dismissal when seeking to justify the dismissal" (underlining added).

I have no hesitation in concluding that the only line of defence presented to the merits of the action must fail.

[16] The same does not apply in relation to the question of quantum of damages. There is a minor dispute relating to how much the pursuer has received from the club since his dismissal. That would not of itself stop summary decree for the balance between the sum sought and the sum claimed as paid by the defenders. However of more importance is a submission for the defenders concerning an alleged failure on the part of the pursuer to fulfil his obligation to minimise his loss. There are some averments in support of that proposition, albeit they are neither clear nor specific. The onus lies on the defenders in this regard, however I consider that they should have the opportunity to improve their pleadings in this context if they can. If they are unable to do so, it will be open to the pursuer to renew his application for summary decree for a financial order. In the meantime I will grant summary decree in favour of the pursuer in relation to the merits of the action. I will do this by repelling the defenders first, second and third pleas-in-law, and upholding the pursuers first plea-in-law.