Donal O'Donovan v Over-C Technology Ltd and Over-C Ltd

• Jurisdiction: Ireland
• Judge: Ms. Justice Costello
• Judgment Date: 16 February 2021
• Neutral Citation: [2021] IECA 37
• Docket Number: Court of Appeal Record Number 2020/148
• Court: Court of Appeal (Ireland)
• Date: 16 February 2021

Between

Donal O'Donovan

Plaintiff/Respondent

and

Over-C Technology Limited and Over-C Limited

Defendants/Appellants

[2021] IECA 37

Costello J.

Haughton J.

Power J.

Court of Appeal Record Number 2020/148

THE COURT OF APPEAL

Injunction – Termination of employment – Costs – Appellants appealing against injunction – Whether damages were an adequate remedy

Facts: The High Court (Keane J) granted the plaintiff/respondent, Mr O’Donovan, an injunction against the defendants/appellants, Over-C Technology Limited and Over-C Limited, pursuant to a written judgment delivered on 12 June 2020 ([2020] IEHC 291). Keane J gave a ruling in relation to the scope of the order and on the costs of the application on 3 July 2020 ([2020] IEHC 327). The appellants appealed to the Court of Appeal in respect of both judgments and Mr O’Donovan cross-appealed in relation to the terms of the order made by the High Court when granting him an injunction and in respect of the order for costs. The appellants argued that the grant of the interlocutory injunction to reinstate Mr O’Donovan in his employment and to pay his six months’ salary on the basis of an implied contractual obligation to fair procedures and natural justice was an error in the circumstances where: (i) Mr O’Donovan’s employment had already terminated at the time of the commencement of the proceedings; (ii) the trial judge accepted that there were no allegations of misconduct, and that the termination was not for misconduct but rather simply poor performance; (iii) the termination was within Mr O’Donovan’s six-month probation period; (iv) the trial judge noted that Mr O’Donovan accepted that mutual trust and confidence between the parties had completely broken down; and (v) the trial judge found that Mr O’Donovan’s case was, in reality, one for a fair termination process. The appellants argued that the trial judge failed to apply common law principles applicable to termination of employment for any or no reason, and that he wrongfully implied a contractual term requiring fair procedures for termination of a contract of employment when performance was not adequate.

Held by Costello J that the trial judge erred in holding that Mr O’Donovan had satisfied the requirement established in Maha Lingham v Health Service Executive [2005] IESC 89 of showing that he had a strong case that he was likely to succeed in trial and, in accordance with Merck Sharp & Dohme Corporation v Clonmel Healthcare Limited [2019] IESC 65, that he was likely to obtain a permanent injunction at the trial of the action. Costello J held that, having noted that the trial judge acknowledged that the mutual trust and confidence which is necessary between an employer and an employee had been irretrievably lost, in these circumstances the courts do not normally grant permanent injunctions restraining the termination of the contract of employment as this would amount to a permanent mandatory injunction to continue a contract of employment in circumstances where such an order would be simply untenable. Costello J noted that the trial judge acknowledged that, in effect, Mr O’Donovan’s claim was one for damages for wrongful termination of his contract of employment. Costello J held that by definition, damages were an adequate remedy within the meaning of the jurisprudence in the circumstances and, accordingly, no injunction ought to have been granted.

Costello J held that she would allow the appeal and vacate the order of the High Court. Provisionally, she was of the view that the appellants had succeeded on the appeal and were entitled to an order for costs against Mr O’Donovan in respect of the appeal and in respect of the hearing in the High Court.

Appeal allowed. Costs to appellants.

UNAPPROVED

JUDGMENT of Ms. Justice Costello delivered on the 16th day of February 2021

1 . This is an appeal against the decision of the High Court (Keane J.) where he granted the plaintiff/respondent (“Mr. O'Donovan”) an injunction against the defendants/appellants pursuant to a written judgment delivered on 12 June 2020 ( [2020] IEHC 291), and he gave a ruling in relation to the scope of the order and on the costs of the application on 3 July 2020 ( [2020] IEHC 327).

2 . The appellants appealed in respect of both judgments and Mr. O'Donovan cross-appealed in relation to the terms of the order made by the High Court when granting him an injunction and in respect of the order for costs. This is my judgment in respect of the appeal and the cross-appeal.

Background

3 . Mr. O'Donovan was offered a contract of employment with the first named appellant (“the employer”) under cover of a letter dated 30 May 2019 which he accepted on 31 May 2019. On 6 August 2019, he commenced work for the employer as its Chief Financial Officer (CFO). The contract provided for a probationary period in the following terms:-

“PROBATIONARY PERIOD

An initial probationary period of six months applies to this position. During this period your work performance will be assessed and, if it is satisfactory, your employment will continue. However, if your performance is not up to the required standard, we may either take remedial action or terminate your employment. Any continuous period of absence of four weeks or more will suspend your probationary period until your return to work.”

4 . The employer reserved the right to take either remedial action or to terminate Mr. O'Donovan's employment during the probationary period. His work performance “will be assessed” during that period. The meaning of this provision will be discussed below.

5 . The contract has a specific clause in relation to termination:-

“TERMINATION TO BE GIVEN BY EMPLOYER: One Month in the first year, Three months thereafter.

…

We reserve the contractual right to give pay in lieu of all or any part of the above notice by either party.”

6 . It was not disputed that the employer was entitled to give payment in lieu of notice in the event that the contract was terminated.

7 . Finally, there were express clauses governing disciplinary rules and procedures and disciplinary appeal procedure:-

“DISCIPLINARY RULES AND PROCEDURES

The disciplinary rules and procedures that apply to your employment are shown in the Employee Handbook to which you should refer.

DISCIPLINARY APPEAL PROCEDURE

The disciplinary rules and procedures which form part of the Contract of Employment incorporate the right to lodge an appeal in respect of any disciplinary action taken against you. If you wish to exercise this right, you should apply either verbally or in writing to the General Manager or the CEO within five working days of the decision you are complaining against.”

8 . It is common case that there were no such disciplinary rules and procedures in the Employee Handbook furnished to Mr. O'Donovan.

9 . Mr. O'Donovan worked for his employer from 6 August to 13 December 2019 when he took annual leave. He returned from annual leave on 7 January 2020. On that day, he had a meeting with the Chief Executive Officer of his employer, Mr. Michael Elliot. At that meeting, Mr. Elliot informed Mr. O'Donovan that his performance was substandard and that the confidence of the board in his capabilities was “at an all-time low”, and that he had lost confidence in Mr. O'Donovan. He told Mr. O'Donovan that his employment was terminated with immediate effect, that payment in lieu of notice would be forthcoming, and that he would write to him confirming his decision.

10 . He wrote a letter the following day, dated 8 January 2020, in the following terms:-

“Thank you for attending our meeting at Over-C's Cork offices on yesterday 7th January.

During this meeting I pointed out to you, that your performance continues to be sub-standard and this has been highlighted to you by various Board members at previous meetings.

I no longer have confidence in your ability to carry out a crucial Chief Finance (sic) Officer role. This is despite the fact that I provided assistance for you with vastly experienced personnel in preparing budgets and board packs on two separate occasions.

• • At the Board Meeting on 2nd December you gave an inflated budget sales figure for 2020 of £6.5 million which was not agreed by either the Sales Director or myself. Subsequently this misleading figure lead (sic) the board to question the credibility of the senior management team and at best made the team look incompetent.

• • Your preparatory work for the Board Meeting of 19th Dec was negligible and this was evidenced by your lack of input in putting the figures and budget deck together with Neil Cross who had flown in to help you.

• • At our meeting yesterday you acknowledged that you were unable to answer the Board's basic cash position question as you do not check Bank Account Balances or accounting platform Xero. This questions the validity of the advice you are providing to the Board.

You have been unable to give me any reasonable explanation for any of the above and your performance is unacceptable. Having given the situation due consideration, I informed you that your employment with Over-C Technology was terminated with immediate effect in line with the terms of your Contract of Employment and within your stated Probationary Period.

You will be paid one months pay in lieu of notice.”

11 . Mr. O'Donovan says that he received this letter by registered post on 13 January 2020. On 8 January 2020, the day after the meeting, Mr. O'Donovan emailed Mr. Elliot in the following terms:-

“I am in shock following on from our conversation yesterday and I am placed in financial difficulty with a young family and mortgage to pay. As per the contract there is an appeal process. I would like to appeal the decision or to discuss what the details are around my departure. You said yesterday that you would look after me and I would appreciate if you could let me know...