Johnson v Unisys Ltd

JurisdictionEngland & Wales
CourtHouse of Lords
JudgeLORD BINGHAM OF CORNHILL,LORD NICHOLLS OF BIRKENHEAD,LORD STEYN,LORD HOFFMANN,LORD MILLETT
Judgment Date22 Mar 2001
Neutral Citation[2001] UKHL 13

[2001] UKHL 13

HOUSE OF LORDS

Lord Bingham of Cornhill

Lord Nicholls of Birkenhead

Lord Steyn

Lord Hoffmann

Lord Millett

Johnson (AP)
(Appellant)
and
Unisys Limited
(Respondents)
LORD BINGHAM OF CORNHILL

My Lords,

1

I have had the advantage of reading in draft the opinions of my noble and learned friends Lord Hoffmann and Lord Millett. I agree with them both and would dismiss this appeal for the reasons which they give.

LORD NICHOLLS OF BIRKENHEAD

My Lords,

2

On this appeal the appellant seeks damages for loss he claims he suffered as a result of the manner in which he was dismissed. He uses as his legal foundation the decision of the House in Mahmud v Bank of Credit and Commerce International SA [1998] AC 20, although that was not a manner of dismissal case. In principle the appellant's argument has much to commend it. I said so, in my obiter observations in Mahmud's case, at pages 39-40. But there is an insuperable obstacle: the intervention of Parliament in the unfair dismissal legislation. Having heard full argument on the point, I am persuaded that a common law right embracing the manner in which an employee is dismissed cannot satisfactorily co-exist with the statutory right not to be unfairly dismissed. A newly developed common law right of this nature, covering the same ground as the statutory right, would fly in the face of the limits Parliament has already prescribed on matters such as the classes of employees who have the benefit of the statutory right, the amount of compensation payable and the short time limits for making claims. It would also defeat the intention of Parliament that claims of this nature should be decided by specialist tribunals, not the ordinary courts of law. I too would dismiss this appeal.

I. Addis's case

LORD STEYN

My Lords,

3

The head note of the decision of the House of Lords in Addis v Gramophone Co Ltd [1909] AC 488 purports to state the ratio decidendi of that case as follows: where a servant is wrongfully dismissed from his employment the damages for the dismissal cannot include compensation for the manner of his dismissal, for his injured feelings, or for the loss he may sustain from the fact that the dismissal of itself makes it more difficult for him to obtain fresh employment. This statement of the law was based on an observation in the speech of Lord Loreburn LC. A majority of the Law Lords expressed agreement with this speech. On the other hand, only Lord Loreburn specifically referred to the unavailability of special damages for loss of employment prospects. The other Law Lords concentrated on the non-pecuniary aspects of the case. The headnote is arguably wrong insofar as it states that the House decided that a wrongfully dismissed employee can never sue for special damages for loss of employment prospects arising from the harsh and humiliating manner of the dismissal: see MacGregor on Damages, 16th ed, (1997), para 1242. Nevertheless, the statement of the law encapsulated in the controversial headnote has exercised an influence over this corner of the law for more than 90 years. It has had a restrictive impact on the damages which an employee may recover for financial loss actually suffered as a result of the manner of wrongful dismissal.

4

It is instructive to consider how this decision was viewed in 1909. Sir Frederic Pollock, the editor of the Law Quarterly Review, was not impressed. In a case note he contrasted "an artificial rule or mere authority" to "the rationale of the matter": (1910) 26 LQR, 1-2. Citing cases contrary to what was perceived to be the Addis rule, and "said to be exceptions," he plainly thought that as a matter of legal principle the decision was questionable. He said:

"In the case of wrongful dismissal, a harsh and humiliating way of doing it, by the imputation which such a dismissal conveys, may make it very difficult for the servant to obtain a new situation. That was how the court looked at it in Maw v Jones [25 QBD 107]; not as a mere personal slight or affront. So in Addis v Gramophone Co The plaintiff was dismissed summarily from an important post in India, and the whole management taken out of his hands in a way which could not but import obloquy among the commercial community of India, and as a result permanent loss. It was no mere rudeness or want of consideration. But the majority of the House of Lords thought the damages in question were really for defamation, and could be recovered only in a separate action."

The supposed rule in Addis has been controversial for a long time. When the first edition of Treitel's classic book on contract was published some 40 years ago the author described the exclusion of any claim by an employee for financial loss to reputation as hard to justify: The Law of Contract, (1962), pp 606-607. In the 10th edition of the same work Sir Guenter Treitel QC, remained of the same view and was able to cite further decisions in which damages were awarded for financial loss of employment prospects or for injury to reputation resulting from a breach of contract: see pp 921-924.

5

During the course of the last century a fundamental alteration in the relationship between employer and employee has come about. And in the economic sphere that relationship has also drastically altered. This is the context in which the question of public importance now before the House is whether Addis's case precludes the recovery by an employee of special damages for financial loss in respect of damage to his employment prospects resulting from the manner of a wrongful dismissal. It was on this basis that the Appeal Committee granted leave to appeal rather than the particular features of the claim under consideration.

II. The background to the dispute

6

In outline the facts are as follows. The employee is now 52 years of age. With a gap of 3 years he was employed by the employers in the software computer industry from 1971 to 1994. In 1992 he became a director of the company. Over the years he suffered from work-related stress and the employers were aware of his particular psychological vulnerability. In January 1994 the employers made allegations against him regarding his conduct. On 17 January 1994 he was asked to attend a meeting. No specific allegations were put to him. Later that day he was summarily dismissed. He lodged an internal appeal. On 3 March 1994 his dismissal was confirmed. Shortly thereafter he made a complaint of unfair dismissal to an industrial tribunal (now called an employment tribunal). By decisions made on 20 February 1995 and 26 July 1995 the tribunal upheld his complaint and awarded him compensation, subject to a finding that he had contributed by 25% to his dismissal. Applying the statutory maximum the employee was awarded £311,691.88.

7

It is agreed that as "a result of the circumstances and the fact of his dismissal the [employee] suffered a major psychiatric illness, involving, inter alia, in-patient treatment from March to August 1994". In addition the employee had to undergo hypnotherapy every three weeks until January 1996; he was re-admitted twice in 1996 to hospital; thereafter he had to undergo intensive psychotherapy and visit a psychiatric nurse; and he had to take anti depressant drugs for depression, mood swings and alcohol dependency. His health has remained severely affected. Despite repeated applications for jobs he remains unemployed. The main obstacles facing him in seeking employment is the time he spent in hospital following his dismissal and the substantial period he has now been out of work in a rapidly developing industry.

III. The proceedings

8

In August 1997 the employee instituted proceedings in the County Court for breach of contract and negligence on the ground of the manner of his dismissal. He alleged that his employers never informed him of the complaints against him. He relied on an implied term of his contract that his employers would not without reasonable and proper cause conduct themselves in such a way so as to damage the relationship of trust and confidence between the parties. The employee further alleged that the manner of his dismissal and the circumstances leading up to it had caused his mental breakdown and inability to find work, with the result that he would suffer a loss of earnings in excess of £3400,000.

IV. The decisions

9

The case came before a judge on an application to strike out the action. The judge viewed the case as in substance one seeking damages for unfair dismissal. He considered that the employee was seeking to circumvent the unfair dismissal legislation. He relied on the law as stated in the headnote in Addis's case. He held that an unfair dismissal could not by itself ground any action to recover financial loss caused by the manner of the employee's dismissal. He struck out the action.

10

The employee appealed. The Court of Appeal gave him an opportunity to amend his particulars of claim. Re-amended particulars of claim were produced. The Court of Appeal indicated that, if the appeal was successful, leave to amend would be given. But Lord Woolf MR, with whom Hutchison and Tuckey LJJ agreed, dismissed the appeal in a closely reasoned reserved judgment: [1999] 1 All E R 854. Lord Woolf expressed agreement with the views of the judge. Lord Woolf held that, despite the form of the re-cast pleading, the substance of the employee's complaint was as to the manner in which he had been dismissed. He proceeded on the basis that the headnote in Addis's case correctly stated the effect of that decision. That is not surprising for the contrary was not argued in the Court of Appeal. He examined in detail the impact of the speeches in Mahmud v Bank of Credit and Commerce International SA [1980] AC 20 on the decision of the House in Addis's case and concluded that the House had merely...

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