Esso Petroleum Co. Ltd v Mardon [1976]

English Contract Law

Esso Petroleum Co. Ltd v Mardon [1976]
‘Gas’ by Edward Hopper

Prior to the Misrepresentation Act 1967 many cases involving mistruths and false inducements relied upon rules of collateral warranty and negligent misrepresentation to establish liability, however on this occasion an international oil company was betrayed by their own haste when attempting to victimise a willing but inexperienced employee.

In 1961 the cross-appellants looked to construct a new filling station within the busy streets of Southport, and so having established the location and calculated the potential value of business it was agreed that once opened the station could very well expect to turnover around 200,000 gallons of petrol per year within its first three years of trading. 

With such positive projections the cross-appellants purchased the site and began work, however during the planning permission stage they were delivered an unexpected blow when the local authority expressed that the petrol pumps were not permitted to face the road, but were instead to be positioned at the rear of the building.

This unexpected design change heavily reduced their previous calculations, however undeterred they sought to recruit a leaseholder for the site, and so after a successful interview the appellant was conditionally offered the post while subject to rents based upon the now unrealistic sales volumes, however during his interview the appellant queried the figures presented while the cross-appellants argued there was no cause for concern and that the original projections remained reliable.

Despite his concerns, the appellant accepted the position before working tirelessly for two years, until faced with financial ruin after losing money from the severely reduced sales, considerable personal investment and a sizeable overdraft no longer repayable, he approached the cross-appellants with every intention to quit, whereupon they agreed to reduce the rent and offer bonus payments from the sale of petrol in order to offset his losses. 

As an act of continued faith the appellant agreed to honour a twelve month contract, however his circumstances continued to deteriorate, and despite the cross-appellants offering him a more profitable station, their support diminished until the arrangement became unsustainable, and yet in 1966 the cross-appellants issued a writ for non-payment of petrol supplied during their working relationship.

Naturally shocked and angered, the appellant counter-claimed for damages caused through the loss of earnings, damage to his health, lost opportunities through his efforts to make the site a success, breach of warranty through the misleading statements made in relation to sales turnover, negligent misrepresentation and the inducement to take employment where the outcome was never going to be the one presented during his interview.

In the first instance the Court of the Queen’s Bench held that the cross-appellants comments were tantamount to opinions and not warranties, but that the claim for negligent misrepresentation was enforceable until the date of the revised employment contract in 1964, while in the Court of Appeal the appellant relied upon Hedley Byrne & Co Ltd v Heller & Partners Ltd, in which the House of Lords had held that:

“[I]f someone possessed of a special skill undertakes, quite irrespective of contract, to apply that skill for the assistance of another person who relies upon such skill, a duty of care will arise. The fact that the service is to be given by means of or by the instrumentality of words can make no difference.”

And so having examined the finer points of collateral warranty and the limitations of contractual breaches, the Court unanimously upheld the appeal on grounds that the flow of damages were unmistakably linked to the claims made and that remoteness could not stand when factoring in the sources of revenue used by the appellant when trying so hard to keep the station afloat, while finally clarifying that:

“[I]f a man, who has or professes to have special knowledge or skill, makes a representation by virtue thereof to another be it advice, information or opinion with the intention of inducing him to enter into a contract with him, he is under a duty to use reasonable care to see that the representation is correct, and that the advice, information or opinion is reliable.”

Köbler v Austria [2003]

European Law

Köbler v Austria
‘The Professor’ by Pino Daeni

art.48 EC and liability for breach of Community law by a Supreme Court, form the basis of an indirect dissemination case, when having worked as an Austrian university professor for over a decade, the claimant sought an application for a conditional length-of-service salary increment available to those serving for a period of fifteen years or more. 

While the terms of this benefit expressed that any qualifying employment must occur within Austria, the claimant applied on grounds that his employment had been within the European Community, therefore refusal for inclusion constituted indirect discrimination under art.48 EC (freedom of movement for workers) (now art.39 EC) and Regulation 1612/68/EEC (freedom of workers within the Community).

Following a rejection by the deciding authorities under para.50(a) of the 1956 Salary Law his claim was brought before the Verwaltungsgerictschof (Supreme Administrative Court), where despite his citing discrimination under Community law, insufficient clarity led to a preliminary ruling request under art.234EC, however the application for preliminary ruling was later withdrawn and judgment made against the claimant on grounds that the salary increments were tantamount to bonuses, and were thereby  exempt from the protection of art.48 EC.

In response the claimant instead sought compensation in the Landesgericht für Zivilrechtssachen Wien (State Court) for the loss of earnings arising from a national judgment which stood contrary to the effects of art.48 EC, while the respondents opposed the claim on grounds that the decision of a Supreme Court does not provide for State liability where proven unlawful, yet despite this the court agreed to seek a preliminary ruling and so asked:

1. Did a breach of Community law by a national court apply to all courts? 

2. If such a breach was applicable to a Supreme Court did the classification of a special length-of-service benefit under an employee bonus constitute a breach of art.48 EC?

3. Did the effects of art.48 EC enable individual claims before a national court? 

4. Did the Supreme Court have jurisdiction enough to answer the questions raised, or did the State Court need to pass judgment?

Upon which the European Court of Justice held that:

1. Irrespective of arguments for the narrowness of Community law upon Member State judiciaries, the findings in Francovich and others v Italy and R v Secretary of State for Transport ex p Factortame had clearly established the liability for reparation by Member States to individual claims, and that such scope included the courts when categorising public authorities.

2. The nature of the breach was vital to the right to individual remedy and while excusable (or inexcusable) errors weigh heavily on the the burden of liability, the circumstances of this claim required little adjudication other than recognition of a clear violation of art.48 EC through the withdrawal of a reference to the Court.

3. With regard to the damage caused by the breach it was held that evidence of the breach constituted sufficient grounds for damages payable by the State under individual claim, and that such reparation must come from domestic legislation provided it offered equal rights as prescribed under the Treaty.

4. As with any preliminary ruling it was not for the Court to determine the method of legal summation, but to simply to advise how best to serve the principles of Community law. 

Thus the Court held that on this occasion it was the duty of the state courts to review and establish the appropriate measure for compensation through the existing case law provided, while further reminding the parties that:

“[M]anifest breach by a Supreme Court of an obligation to make a reference for a preliminary ruling is, in itself, capable of giving rise to State liability.”

Foster v British Gas [1986]

European Law

Foster v British Gas [1986]
‘British Gas Works on the River Spree’ by Adolf Meckel von Hemsbach

In the same way that Marshall v Southampton and South West Area Health Authority [No.1] determined the rights of female employees under the protections of Directive 76/207/EEC, this class action matter extended its scope to allow damages for dismissal under the guise of retirement.

When six former workers were subjected to forced retirement at the age of sixty, they sought remedy through the industrial tribunals on grounds that the respondent had violated its obligation to observe the Directive’s principles of equality, and thus they were entitled to compensatory payment in lieu of their significant financial losses.

In the first instance the appellants claims were dismissed on the strength that since 1986 the British Gas Corporation had become a private entity, and therefore it fell beyond the scope of the Directive, while a subsequent appeal to both the Employment Appeal Tribunal and the Court of Appeal proved futile.

Undeterred, the appellants presented their case to the House of Lords, who sought a preliminary ruling from the European Court of Justice under art.177 EC, whereupon two questions asked: 

1. Whether the manifestation of British Gas Plc (at the time of the claim) was within the terms of the meaning “state”? 

2. And if so, what form the award might take? 

Having evaluated the facts, the House held that when Directive 76/207/EEC first came into force it was ignored by the United Kingdom and subsequently failed to become part of domestic legislation within the provided timeframe, therefore the respondents were state owned and thereby subject to the terms of the Gas Act 1972, while the state’s failure to transpose the terms of the Directive left it open to the Community law doctrine that ‘no state can profit from its own failure’.

This resulted in a judgment for the appellants on grounds that the terms of the Directive were fully applicable to the respondents as they qualified as an emanation of the state and were subject to the effects provided under it, while the Court reminded the parties that:

“[T]he State may not benefit from its default in respect of anything that lies within the sphere of responsibility which by its own free choice it has taken upon itself, irrespective of the person through whom that responsibility is exercised.”

Defrenne v SABENA [1976]

European Law

Defrenne v SABENA [1976]

The effects of art.119 EC and the stark inequality between men and women in the workplace were brought together in a case that showcased both the power of law and the equitability of the European Community.

Employed as an air hostess in 1963 by Belgian Société Anonyme Belge de Navigation Aérienne (SABENA), the appellant was re-contracted as a cabin steward and air hostess under the title of cabin attendant, however the contractual caveat was that unlike her male counterparts she was expected to retire from her duties at the age of forty, while termination of her employment entitled her to twelve months severance pay without pension rights.

Having been forced to retire as per the contract, the appellant initiated discrimination proceedings on a number of grounds including the assertion of her right to equal pay under the terms of art.119 EC which explains that:

“1. Each Member State shall ensure that the principle of equal pay for male and female workers for equal work or work of equal value is applied.”

And yet despite her contentions the Tribunal du Travail of Brussels dismissed her claims outright before her appeal to the Cour du Travail of Brussels was further dismissed with the exception of inequality of salary, however despite the court’s ability to overrule its own legislation in favour of the Treaty article, it chose instead to seek a preliminary ruling from the European Court of Justice.

For clarity, in 1957 the Treaty of Rome included the express requirement that every Member State would ensure and maintain the application of the principle that men and women should receive equal pay for equal work, and while the initial adoption period was set at two years, Belgium never amended its own legislation to reflect the values of the Treaty Article until 1967, in which s.14 of Royal Decree 40 enabled women in such situations the rights to seek remedy within the national courts.

On this occasion the Belgian government’s defence was that while art.119 conferred powers to those women paid less than men in similar roles, the effect of that principle  fell solely within the limitations of public office and not private contracts, however the claimant countered that by all accounts the direct effect of art.119 EC had existed since 1957 and so provided her with retrospective rights of recovery. 

Once before the European Court of Justice, the Advocate General clarified that direct effect relied upon the clarity of the regulation, and so when addressing sexual inequality it was clear how the principle’s purpose relied upon the differences cited, thus the Court held that going forward the national courts were to refrain from reference to art.177 EC in order to seek preliminary rulings when there was sufficient cause within art.119 EC to overrule domestic legislation under the rule of Community law, while reminding the parties that:

“Article 119, despite the fact that it is restricted to imposing an obligation on the States, is primarily concerned with the relationship between individuals. The discrimination which the provision sets out to prohibit will, in the majority of cases, consist of discriminatory action by a private undertaking against women workers.”

Wagner Miret v Fondo de Garantía Salarial [1993]

European Law

Wagner Miret v Fondo de Garantía Salarial
‘Coastal Fort, Catalonia’ by Alan Page Smith

Directive 80/987/EEC was drafted to protect the lost earnings of employees subject to the liquidation of their employers, however when a higher management employee was later made redundant through company dissolution he was subsequently denied lost earnings under Spanish law on grounds that when adopting the effects of the Directive the government had chosen to exclude domestic servants from the guarantees afforded them, and yet applied that caveat when deciding his case in the Juzgado de lo Social (Social Courts).

Having challenged the judgment in the Tribunal Superior de Justice (Superior Court of Justice) it was argued that when applying the terms of Directive 80/987/EEC the legislature had relied upon Royal Decree No.1382/85 to deliberately deny higher management the rights afforded other employees through the pay guarantee fund, as established under art.33 of Law No 8/80 (‘The Employees’ Statute’).

This left the Court unable to fully address the claim without reference to the European Court of Justice for a preliminary ruling under art.177 EC, and so three questions asked:

1. Whether the terms of Directive 80/987/EEC included all employees of the Member States?

2. Whether the failure of the Spanish government to encompass higher management staff within the annexe excluding domestic servants, provided for prevention of a claim?

3. If the answer to question 1. was yes, should the payment should come from the guarantee fund or State compensation?

With consideration of the historic debate surrounding this contentious matter the Court held that when transposing the terms of the Directive the Member States should determine what constitutes employment under the meaning of national law, and where agreed those employees were to be protected under the effects of art.1(2) of the Directive.

In relation to the exclusion of higher management it was agreed that unless expressly contained in the annexe to Directive 87/987/EEC (later amended to Directive 87/164/EEC) those occupying such roles were entitled to received compensatory payment, while with regard to the source of payment the Court clarified that in similar instances it was the role of the Member State to devolve payment to the fund created, or if no such fund existed the compensation was due from the Member State itself, before reminding the parties that:

“[I]n so far as national law classifies members of the higher management staff as employees, a Member State cannot exclude that category of employee from the scope of application of Directive 80/987/EEC, as amended by Directive 87/164/EEC, if it is not included in the Annex to that directive.”

Marshall v Southampton and South West Area Health Authority (No.1) [1986]

European Law

Marshall v Southampton
‘Abstract Women 010’ by Corporate Art Task Force

Dismissal upon grounds of sexual discrimination and the direct effect of Community law Directives in issues of state employment were the key ingredients to this matter, when a former employee of the South-West Hampshire Area Health Authority was subjected to unexpected termination of her employment, despite intimations that her post was secure beyond policy requirements.

Having joined the department in 1974 the applicant had enjoyed working as a Senior Dietician until she reached the contracted retirement age (five years earlier than her male colleagues) at which point it was agreed that she could continue working although no specific end date was discussed, however the applicant was dismissed without notice two years later upon grounds that she was a woman and so considered beyond retirement age and surplus to requirements.

Immediately after her departure the applicant sought to challenge the decision through the enforcement of Council Directive 76/207/EEC, which supports the ‘principle of equal treatment’ inasmuch as art.1(1), (2), 2(1) and 5 collectively confer Member State obligations to apply and maintain the equal treatment of men and women with regard to employment, promotion, training, working conditions, social security, dismissal and the prohibition of any discrimination (whether directly or indirectly), while these rights applied to all manner of employment arrangements.

In the first instance the industrial tribunal denied her claim under the s.6(4) of the Sex Discrimination Act 1975, which provided that discrimination by an employer was exempt under retirement conditions, and that the pensionable age of women under s.27(1) of the Social Security Act 1975 supported the age of retirement through the  availability of state pensions as of sixty years of age. 

Upon dismissal of her appeal she challenged the findings again, whereupon the Court of Appeal was forced to raise two questions with a view to a preliminary ruling under art.177 EC, namely: 

1. Whether the appellant’s dismissal after reaching retirement age on the basis that she was a woman constituted sexual discrimination under Directive 76/207?

2. That if so agreed, whether the terms of the Directive allowed for direct effect given the conflict between domestic legislation and Community law?

And so having referred the case to the European Court of Justice it was held that while the Health Authority relied upon the narrowness of meaning when determining the powers of legislation, they failed to appreciate that all Member States are obliged to adopt the principles of a Directive within a designated period (which on this occasion had long since elapsed), and that when doing so must adjust or if necessary, remove the applicable statute so as to give full effect to the meaning of the Directive. 

It was further noted how the Health Authority had sought to avoid the duties called for under Community law while expanding the terms of the Social Security Act 1975 beyond their meaning when deciding that pensionable age was a prerequisite to retirement, which amounted to nothing more than overt sexual discrimination against which the appellant had a valid and lawful right of claim.

Looking next to the effect of Directive 76/207/EEC it was argued by the Health Authority and the United Kingdom that the terms within were prescribed for the benefit or use of the Member State and not the individual, and that the terms of an non-implemented Directive excluded contracts between private parties. 

It was further argued that the State was entitled to be seen as a private employer for the purposes of the case, thus it was contended that the appellant was denied the right to bring action against the State and so a review of the Sex Discrimination Act 1975 was required before the continuation of proceedings. 

In stark contrast the Court upheld the appeal on grounds that a failure to adopt the Directive had rendered the Health Authority liable for penalty and thereby accountable at law as an emanation of the State, therefore a citizen could claim such rights within the domestic court in lieu of their non-implementation, before reminding the parties that:

“[W]herever the provisions of a Directive appear, as far as their subject matter is concerned, to be unconditional and sufficiently precise, those provisions may be relied upon by an individual against the State where that State fails to implement the Directive in national law by the end of the period prescribed or where it fails to implement the Directive correctly.”