Crossley v Faithfull & Gould Holdings Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Dyson,Lord Justice Thomas,The Vice-Chancellor |
| Judgment Date | 16 March 2004 |
| Neutral Citation | [2004] EWCA Civ 293 |
| Docket Number | Case No: A2/2003/1563 |
| Court | Court of Appeal (Civil Division) |
| Date | 16 March 2004 |
[2004] EWCA Civ 293
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM LEEDS DISTRICT REGISTRY
(His Honour Judge Peter Langan QC)
Royal Courts of Justice
Strand,
London, WC2A 2LL
The Vice-Chancellor
Lord Justice Dyson and
Lord Justice Thomas
Case No: A2/2003/1563
Mr A. White QC (instructed by Messrs Ford & Warren) for the Appellant
Mr J. Cavanagh QC and Mr D. Oudkerk (instructed by Messrs Clyde & Co) for the Respondent
This is an appeal brought with the permission of the trial judge against the judgment of His Honour Judge Langan QC delivered on 30 June 2003 dismissing the claimant's claim for damages against the defendant, his former employer, for breach of implied terms of his contract of employment. The judge gave permission to appeal because it was recognised on both sides that the appeal raises "difficult, and highly debatable, questions in a developing area of employment law".
The claimant was a long-standing senior employee and director of the defendant company. Under the terms of his contract of employment, if he was absent from work due to illness, he was entitled to be paid his full salary for up to six months' absence in any period of 6 months, and thereafter such remuneration as the board of the defendant might in its discretion allow. By clause 13 of his contract of employment, the claimant became a member of the defendant's Group Long Term Disability Insurance Scheme ("the Scheme") . The insurers were UNUM Ltd ("UNUM") . It is unnecessary to set out the details of the Scheme. Suffice it to say that so long as the claimant remained in the defendant's employment, he was entitled as of right to benefits in the event that he was "totally unable by reason of sickness…to follow his Occupation"; and after the termination of his employment with the defendant, benefits were payable at the discretion of UNUM.
At all material times, Richard Hall was the managing director of the defendant. He had, among other duties, overall responsibility for all types of insurance taken out by the defendant. He would not, however, ordinarily deal with an individual claim. David Ridley became acting chairman of the defendant in February 1996 and chairman one year later.
Thomas Suffell was an insurance broker and director of Castlegate Insurance Brokers Ltd ("Castlegate") . Much of the defendant's insurance was arranged through Castlegate, including permanent health insurance under the Scheme. If a claim was made under the Scheme, Mr Suffell would act as intermediary between the defendant and UNUM. As well as dealing with the defendant, Mr Suffell was also adviser to a number of the directors on their individual pension arrangements. These directors included the claimant: he and Mr Suffell had known each other since about 1985.
In February 1996, the shares in the defendant company were sold to W S Atkins Ltd ("Atkins") . On completion of the sale, it became a wholly-owned subsidiary of Atkins. As consideration for his shares, the claimant received £777,806 in cash and 444,298 new shares in Atkins. In February and March 1997, the claimant attended meetings with representatives of KPMG to discuss means by which the shares could be sold without incurring a liability for capital gains tax.
In late 1996, he had suffered a nervous breakdown and was advised by Dr Beaini, his consultant psychiatrist, to consider taking early retirement on health grounds. He went on sick leave on 6 December 1996, and never returned to work. By late February 1997, the defendant realised that the claimant might be going to make a claim under the Scheme. It was also during this period that Mr Suffell was made aware of the possibility that the claimant would make a claim under the Scheme. In the week commencing 17 March, the claimant telephoned Mr Suffell and asked what needed to be done in order to make a claim. Mr Suffell replied that the defendant would have to contact UNUM.
On 17 April 1997, the claimant saw Dr Beaini again. The doctor considered that there was no prospect of the claimant's recovering from his moderate to severe depression in the foreseeable future, and advised him to pursue an application for early retirement on mental health grounds. This advice was accepted by the claimant.
On 21 April 1997, he spoke by telephone to Mr Hall, the defendant's managing director. There was a dispute at the trial between the claimant and Mr Hall as to what was said during this conversation. The claimant's account was that he asked Mr Hall whether he could make a claim under the Scheme, and Mr Hall said that all he needed to do was to provide a letter stating that he wanted to retire on health grounds. Mr Hall denied that he would have told the claimant that he would not receive benefits under the Scheme unless he retired. At para 42 of his judgment, the judge concluded that Mr Hall had not made a request for a letter of retirement from the claimant for the purpose of obtaining benefits under the Scheme. He found that, whilst the Scheme might have been mentioned in the conversation, the discussion was primarily focused on the claimant's forthcoming departure from his post with the defendant.
On 22 April 1997, the claimant wrote to Mr Hall:
"Further to our recent conversation I enclose a copy of my consultant's letter regarding my state of health.
I had hoped that the lengthy break on sick leave would have enabled me to recover but I must now accept that I could not sustain a return to the pressures of work.
After 21 years with Faithful & Gould it is not an easy decision but I now wish to pursue an application for early retirement upon health grounds and hope that you will be able to put the necessary wheels in motion".
On 29 April, the claimant completed a form seeking long-term disability benefit under the Scheme. The application for benefit had to be made by the defendant and, at Mr Hall's request, the claimant completed much of the form. This was signed on behalf of the defendant on 2 May. On each form there was a question "Has employment been terminated?", in answer to which the claimant ticked the box marked "No".
During May and June, there were discussions between the claimant and Mr Ridley about the arrangements for the claimant's retirement. At first, Mr Ridley said that the company would pay the claimant's salary until 6 June (6 months after he had stopped work) . The claimant looked at his service agreement, and saw that the company had a discretion to continue paying his salary beyond that date. He pointed this out to Mr Ridley, who agreed to pay a further 3 months' salary, but required a letter from the claimant confirming that he would be retiring on 6 September. The claimant, therefore, wrote to Mr Ridley on 4 June:
"Following our recent conversation I confirm that I shall be retiring from Faithful & Gould upon 6 September 1997 upon health grounds.
May I thank you for the generous offer to pay my salary until that date (subject to insurance payments) ."
By a letter dated 28 July, Mr Hall wrote to the claimant:
"As we discussed, I enclose some words which should satisfy the requirements of Atkins Personnel Department but which should obviously be written in your own style.
"Further to our recent conversation I confirm that because of continued ill health I shall be retiring with effect from 6 June 1997 both as an employee and as a director of Faithful & Gould Limited. I also confirm that I am happy to waive any notice period to which I am entitled.
(Final paragraph written by you)"
It would be best if you could date this letter prior to 6 th June 1997".
Accordingly, shortly after 28 July, the claimant wrote a further retirement letter. This was back-dated to 28 May, and included a paragraph which in all material respects corresponded precisely with Mr Hall's draft.
The effect of the termination of the claimant's employment was that he ceased to be entitled to benefit under the Scheme as of right, and became instead entitled to receive discretionary benefits. In the exercise of its discretion, UNUM paid benefit until June 1998, but not thereafter. The defendant would have been content for the claimant to remain on its books as an employee, albeit on indefinite sick leave, for the purposes of receiving benefit under the Scheme.
The judge found (para 66) that Mr Hall (and, therefore, the defendant) knew that, if the claimant resigned from his employment, his right to benefits under the Scheme would cease, and he would be dependent for benefits on the exercise by the Scheme's insurer of its discretion in his favour.
The Nature of the Claimant's Case
In the court below, the claimant's case was presented on three alternative bases. Each was rejected by the judge. The claimant does not challenge the judge's decision on the first basis of claim (which was founded on the disputed telephone conversation between the claimant and Mr Hall of 21 April 1997) . This was that Mr Hall had advised him that, in order to obtain benefits under the Scheme, he needed to retire. But it is submitted by Mr Antony White QC on behalf of the claimant that the judge was wrong to reject both of the other bases of claim. These were that the defendant acted in breach of an implied term of the contract of employment requiring it to take reasonable care for the claimant's economic well-being (i) by asking him to submit a resignation letter knowing that he was applying for benefits under the Scheme and that resignation would seriously prejudice his entitlement to such benefits; alternatively (ii) by failing to...
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