18 / 336
the two remaining small clients
The issue in this action is as to what relief, if any,
the company is entitled in respect of its loss. The claim
is for an injunction or alternatively damages. Having
regard to the fact that the company has ceased to carry
on any business an injunction to restrain the defen-
dants from carrying on their business is clearly inappro-
priate regardless of whether the company's rights have
been infringed. Whether an action for damages lies and
if so the measure of damages must depend on what
breaches of contract or torts have been committed.
Miss Ralston's contract considered
There is no difficulty in determining what are the
contracts of Mr. Mitchell and Mr. Bingham because
Mr. Mitchell had a written contract and Mr. Bingham's
position depends on the common law. Miss Ralston,
however, as I have already indicated, entered into a
written agreement allegedly with the company five days
before its incorporation. The contract was therefore in
law a nullity and incapable of ratification or adoption
by the company when it came into existence. If the con-
tract had any efficacy thereafter it could only be because
the parties contracted after incorporation on the terms
of the abortive agreement or otherwise contractually
agreed to be bound by its terms.
Whether they did so is a question of fact but to
decide that they did requires proof of circumstances
pointing clearly to such a new contract. I do not regard
such joint and several applications as pointing to a new
contract between the company and Miss Ralston incor-
porating all or any of the terms of the abortive agree-
ment, especially as these requests failed to secure any
agreement.
Nor does the fact that Miss Ralston has apparently
throughout considered that she was bound by terms of
service. corresponding to those in the pre-incorporation
agreement provide evidence of a subsequent contract.
If a company after incorporation agrees to modify a
void agreement made on its behalf before incorporation
it may be possible to enter a new contract incorporat-
ing all the terms so far as not varied, see
Howard v.
Patent Ivory Manufacturing
Company 28 Ch.D. 156,
but Miss Ralston's salary after incorporation was the
same as she had enjoyed when in the employment of
the branch of Fogarty Advertising Ltd. and any in-
crease agreed without express reference to the pre-
incorporation contract with the company could not
reasonably breathe life into that still-born body.
Miss Ralston employed under a general contract
I take the view, therefore, that Miss Ralston, on 1
August 1973 was employed by the company under a
contract the terms and conditions of which (other than
that relating to remuneration) depended on the general
law and not on any specific agreement.
By their act of repudiating their contracts of service
on August 1 and walking out without notice, each of
the defendants was in deliberate breach of contract.
That repudiation did not in the absence of any evidence
of agreed reccision abrogate the contracts of service. It
was not challenged that, lacking any express contract,
Miss Ralston's service required three months' notice to
terminate, Mr. Mitchell's contract provided for one
month's notice and having regard to Mr. Bingham's
status, a similar notice was requisite in his case.
It is a fundamental and elementary principle arising
from the relationship of master and servant that until
that relationship has been determined, the servant
must act in the interest of his master and may not
seek to advance his own interests to the detriment of
his master's.
I am satisfied that the defendants intended
that there should be no break in the continuity
of business. If Mr. Fogarty agreed to an immediate
sale, well and good. If not, the intention was to set up
in opposition at once and arrangements had been made
for alternative office accommodation.
I am, therefore, satisfied that before the defendants
went to Dublin they put to the rest of the staff a pro-
position which, if accepted, necessarily involved a walk-
out without any notice. The practical alternatives which
were available to the staff as Miss Ralston recognised
were to break their contracts with the company and go
over to the defendants or to be jobless because there
would be no work left to the company.
Defendants conspired to induce a breach of contract
The defendants therefore induced breaches of con-
tract by all the staff and conspired together to achieve
that end. Quite apart from any question of conspiracy
or inducement of breaches of contract, each of the
defendants was in clear breach of the implied duty of
good faith owed to the company as their employer. At
a time when both the defendants and the other mem
bers of the staff were servants of the company the
defendants offered to take the others into their own
employment, thereby subordinating their duty to ad-
vance the company's interests to their own self-interest.
So to act was undoubtedly unlawful and indeed
would have been so according to the authority of
Sanders v. Parry
(1967) 1 W.L.R. 753 at 764 even
though the offer of employment was to have taken
effect only after both the defendants and the staff had
lawfully terminated their various contracts of employ-
ment which, of course, was not the present case.
Plaintiff's loss of business due to defendant's conduct
The almost total loss of business by the company
arises from a combination of circumstances. First it had
been built up almost entirely by the defendants and
its maintenance depended upon the continuance of
personal contact and confidence. Secondly, it is posi-
tively established and, indeed, largely admitted that the
defendants simultaneously with their negotiations with
the staff and certainly before August 1 were also in
communication with the company's clients elplaining
to them their proposals for starting business on their
own and securing assurances of a continuance of custom
to the new enterprise.
It was because of such assurances that the defen-
dants were able to put to the staff the proposition that
they accept the offer of employment with R.M.B. "or
take a week's notice as no jobs would be available in
A.F. Associates Ltd. as there would be no clients to
service." I quote paragraph 13 of Mr. Fogarty's affi-
davit sworn on 18 September 1973.
To canvass the customers of one's master during the
subsistence of a contract of service even though it be to
secure a transfer to their custom only after the con-
tract of service has determined is a breach of the ordi-
nary implied obligation of a servant not to use his
master's time in furthering his own interests, to quote
Greer L. J. in Wessed Dairies Limited v. Smith (1935)
2 K.B. 80 p. 84. Even if the soliciting of clients had
only occurred after August 1 but before the proper
period of notice would have expired the position would
in my opinion have been no different. Long before
August had expired, all substantial clients had trans-
ferred to the defendants and the company as a com-
16