MARSHALL V. MCRAE.

Master and servant- Wrongful dismissal-Right to dismiss--Grounds of dismissal-Exercise of right-Forfeiture of property.

The plaintiff, who was the inventor of a certain machine and had assigned certain patents therefor to the defendant, agreed to obtain patents for certain improvements made by him thereon, and to assign them to the defendant as soon as obtained, who in consideration thereof agreed to employ the plaintiff for two years from the date of the agreement for the purpose of demonstrating and placing the patents on the market, and to pay him a certain sum for salary and also his expenses, and the plaintiff and defendant were to share the profits in certain proportions. The tenth clause of the agreement was as follows:-"It is further agreed that the party of the first part (the defendant) is to be the absolute judge as to the manner in which the party of the second part (the plaintiff) performs his duties under this agreement and shall have the right at any time to dismiss him for incapacity or breach of duty, in which event the party of the second part shall only be entitled to be paid his salary up to the time of such dismissal, and shall have no claim whatever against the party of the first part.

The defendant dismissed the plaintiff within three months of the date of the agreement for alleged disobedience and incapacity, without communicating to the plaintiff his reasons for so acting or calling upon him for any explanations :

Held, [Hagarty, C. J. O., dissenting] that the plaintiff having certain rights of property under the agreement the parties to it did not occupy merely the relation of master and servant, and that under the tenth clause the defendant occupied a quasi judicial position and had no right arbitrarily to dismiss the plaintiff but was bound to act in good faith and to enquire into the circumstances upon which he based his determination to dismiss, this necessarily involving notice to the plaintiff and an oppor unity of being heard.

Russell v. Russell, 14 Ch. D. 471, distinguished.

Judgment of the Queen's Bench Division, 16 O. R. 495, affirmed.

THIS was an appeal from the judgment of the Queen's Statement. Bench Division, reported 16 O. R. 495.

The plaintiff had invented a crimping machine, the patent for which he had assigned to the defendant. Subsequently he made certain improvements upon this machine and entered into an agreement with the defendant, on the 2nd of February, 1886, in which he agreed to assign to the defendant, in consideration of certain benefits, the patents of invention for improvements then held by him, and any other patents that he should thereafter obtain.

The following were the material clauses of the agreement in question:—

"3. Forthwith after the granting of such letters patent,

Statement.

or any letters patent hereafter granted, the said Thomas Tinnock Marshall shall execute to the said John A. McRae an assignment, in due and proper form, of all such letters patent granted, or at any time hereafter to be granted, whether for improvements or otherwise, and the said assignment shall contain a covenant on the part of the said Marshall not to do, or assent to, or cause to be done, any act, deed, matter, or thing whereby the said letters patent, or any of them, shall be forfeited or invalidated.

4. In consideration whereof the party of the first part hereby agrees to employ the party of the second part for the term of two years from the date hereof, for the purpose of demonstrating and placing the said patents of invention granted, or hereafter to be granted, on the market, on the following terms, viz.-The said John A. McRae covenants to pay the said Thomas T. Marshall the sum of $100 per month during the said term of two years, payable monthly. and in addition to said salary the party of the first part covenants and agrees to pay the actual travelling expenses and board of the party of the second part. And it is further agreed between the parties hereto that the said Thomas T. Marshall shall be entitled to and receive twenty per cent. of the actual net profits that are derived, in any way whatsoever, from the sale or otherwise of the said patents of invention.

5. That the said party of the first part shall cause to be kept proper books of account, and entries shall be made therein of all such matters, transactions, and things as are usually kept and entered in books of account, and all the costs, charges, and expenses in connection with the purchase of the said patents of invention by the said McRae, and of the obtaining assignments thereof, and all the costs, charges, and expenses in connection with the obtaining of further or other patents of invention, and any renewal or renewals thereof, and all the costs, charges, and expenses in connection with the demonstrating and placing the said patents of invention on the market, including the said salary of the said Marshall, and all losses arising in any

way in connection with the said patents, shall be a first Statement. charge on the profits that may hereafter be derived from the said patents and shall be first deducted before any division of profits shall take place or be made.

6. That the said John A. McRae shall be absolute judge of what are expenses and what are not, and shall have the exclusive control and management of all matters in connection with the said patents and the party of the second part simply being his agent for the purposes aforesaid.

7. That the said John A. McRae shall, in the event of said business not proving a success, have the right to cancel this agreement at any time after the expiration of six months from the date hereof if he shall deem it advisable so to do, by paying the party of the second part all salary which may be due up to the date of such cancellation, and his share of the profits, if any, on the basis aforesaid.

8. That the said Thomas T. Marshall shall devote his whole time and attention to the business of the party of the first part, and shall neither directly nor indirectly engage in any other business, occupation, or employment, and that he shall be faithful to the said McRae in all his transactions and dealings.

10. It is further agreed that the party of the first part is to be the absolute judge as to the manner in which the party of the second part performs his duties under this agreement, and shall have the right at any time to dismiss him for incapacity or breach of duty. In which event the party of the second part shall only be entitled to be paid his salary up to the time of such dismissal and shall have no claim whatever against the party of first part."

A few months after the making of this agreement the plaintiff and defendant had a dispute as to the manner in which the plaintiff was attending to the experiments in connection with the machines, and the procuring of the patents for the improvements, and the defendant without any notice to the plaintiff summarily terminated the engagement. The defendant contended that he had a right 19-VOL. XVII. A.R.

Statement.

to put an end to the agreement at his own discretion, and that the plaintiff had no further interest in the patents or in the profits and no further claim upon the defendant.

The plaintiff brought this action for damages and it was tried before ROSE, J., at Hamilton, on the 23rd of April, 1888, judgment being given in favour of the defendant with costs.

On motion to the Divisional Court this judgment was reversed and judgment was entered in favour of the plaintiff for $2,350 as damages for wrongful dismissal, and it was also declared that the plaintiff was entitled to receive from, and be paid by, the defendant 20 per cent. of the actual net profits which had theretofore been derived, or might thereafter be derived, in any way, from the sale or otherwise of the letters patent and patented inventions, and a reference was directed.

The defendant appealed, and the appeal came on to be heard before this Court, (HAGARTY, C.J.O., BURTON, OSLER, and MACLENNAN, JJ.A.) on the 21st and 22nd of October, 1889.

McCarthy, Q. C., and J. J. Scott, for the appellant. There was ample cause to justify the dismissal of the plaintiff. It was his duty to make such tests as should be directed by the defendant, and without excuse he refused to obey the commands of the defendant and resorted todeception so that his dismissal was justifiable. This would be the right of the defendant under the general law governing master and servant, but in the present instance the rights of the defendant are far higher, for under this agreement he is made the absolute judge as to the conduct of the plaintiff and he might dismiss the plaintiff even capriciously or harshly so long as he did not act in bad faith. He was not acting as a judicial tribunal but was exercising an absolute discretion and it was unnecessary for him to formulate any charge or call upon the plaintiff for any explanation or defence: Russell v. Russell, 14 Ch. D. 471. Here the plaintiff had no interest or property in the

patents. As part of the remuneration for his services he Argument. was entitled to a certain percentage of the profits, but this he was entitled to only so long as he fulfilled his engagement and obeyed the commands of his master the defendant, and the engagement having been validly terminated by the defendant the right of the plaintiff to remuneration is at once put an end to and he has now no further interest in the patents or profits.

Moss, Q.C., and Carscallen, for the respondent. Clearly under the agreement the plaintiff was entitled to one-fifth of the profits and this is equivalent to saying that he has a one-fifth interest in the improvements and the patents themselves. The plaintiff, therefore, was not a mere servant in the ordinary sense and there was no right to dismiss him so as to work a forfeiture of his interests in these patents and improvements. Nor was there anything to justify the dismissal of the plaintiff even assuming that the mere relationship of master and servant existed between himself and the defendant. The defendant really was endeavouring to use as an excuse for the dismissal of the plaintiff his dissatisfaction with the working of the machine. That was not a ground for dismissal though it might have been a ground for rescission or damages. Then the defendant has not acted in good faith but has really endeavoured to oust the plaintiff in this manner so as to obtain for himself the whole profits. The plaintiff should at least have been called upon for an explanation and have been given an opportunity of explaining. Russell v. Russell, 14 Ch. D. 471, is really a decision in favour of the plaintiff. In that case the articles of partnership in question gave power to determine the partnership but gave no right to take away any interest. There was nothing in that case involving property or reputation, but merely the ordinary power to determine a partnership. If the defendant had heard the plaintiff's explanation and had decided in good faith it might be that the Court could not review that decision, but it is clear that where the right of dismissal depends upon a question of conduct then an