Gross Misconduct

May 28th, 2012 by James Goudie KC

The decision of the Court of Appeal in Boston Deep Sea Fishing v Ansell (1888) 39 Ch D 339 is a leading authority for some of the basic principles governing dismissal of an employee for gross misconduct: (1) where an employee is guilty of gross misconduct, he may be dismissed summarily, even before the end of a fixed period of employment; (2) dismissal may be justified by reliance on facts not known to the employer at the time of the dismissal, but only discovered subsequently, even after the proceedings began; and (3) the dismissed employee is not entitled to any wages or salary for the broken period of employment immediately preceding his dismissal, because his entitlement had not accrued by then.  

In Cavenagh v Williams Evans Ltd [2012] EWCA Civ 697 the employee was guilty of gross misconduct.  This was not known to the employer when they dismissed him for redundancy and he became entitled to six months pay in lieu of notice, which the employer agreed to pay.  Subsequently the employer discovered the pre-dismissal gross misconduct.  Had it known of it at the time it would have accepted his repudiatory breach of his service agreement and regarded itself as discharged from liability for pay in lieu of notice. 

The employee sued for his pay in lieu.  In the Court of Appeal he succeeded.  The after-discovered gross misconduct did not enable the employer to avoid the payment of an accrued debt.  Boston Deep Sea Fishing was distinguished.  

Mummery LJ said, at para 39: 

            “Boston Deep Sea Fishing did not go as far as to say that after-discovered misconduct provided an employer with a defence to an action for payment of an accrued debt.  The principle for which that case stands is that an employer can defend a claim for damages for wrongful dismissal by using at trial, in its defence of justification, evidence of misconduct by the employee that was not known to the employer at the time of dismissal. … his appointment was terminated … in a fashion that was lawful: … The consequence of the lawful termination was that the Company became contractually bound to Mr Cavenagh for pay in lieu.  All of that happened before the Company knew of, or was in a position to accept, Mr Cavenagh’s prior repudiatory breach.  The lawful termination had already triggered the liability for pay in lieu, which was, as a matter of legal analysis, quite a different situation than that facing the Court of Appeal in Boston Deep Sea Fishing.”

Tomlinson LJ said, at para 54: 

            “… the Boston Deep Sea Fishing principle is … of no relevance here, since the employer is not seeking retrospectively to justify a termination which was impermissible upon the grounds put forward at the time. “