Scally and Others v Southern Health and Social Services Board and Another

JurisdictionEngland & Wales
CourtHouse of Lords
JudgeLord Bridge of Harwich,Lord Roskill,Lord Goff of Chieveley,Lord Jauncey of Tullichettle,Lord Lowry
Judgment Date23 October 1991
Judgment citation (vLex)[1991] UKHL J1023-2

[1991] UKHL J1023-2

House of Lords

Lord Bridge of Harwich

Lord Roskill

Lord Goff of Chieveley

Lord Jauncey of Tullichettle

Lord Lowry

Scally and Others
(Respondents)
and
Southern Health and Social Services Board and Others
(Appellants)
(Northern Ireland)
Lord Bridge of Harwich

My Lords,

1

The plaintiffs in the four actions from which these appeals arise are all medical practitioners employed in the Northern Ireland health services. The defendants are the respective Health and Social Services Boards by whom each plaintiff is employed. The terms of the contracts under which the plaintiffs have been employed have at all material times incorporated the provisions from time to time in force of regulations governing the rights and liabilities of persons employed in the health services in relation to superannuation. Hence, under the terms of their contracts of employment, the plaintiffs have been required to make contributions to the statutory superannuation scheme and have been entitled to its benefits. The principal regulations are the Health Services (Superannuation) Regulations (Northern Ireland) 1962. To qualify for a full pension under the principal regulations as originally enacted it was necessary for an employee to complete 40 years' contributory service. The Health Services (Superannuation) (Amendment) (No. 3) Regulations (Northern Ireland) 1974 which came into force on 10 February 1975 gave to employees the right to purchase "added years" of pension entitlement on certain terms in order to make up the full 40 years' contributions to qualify for maximum pension. This right, however, was only exercisable within 12 months from 10 February 1975 by persons already employed in the Health Services when the 1974 Regulations came into force and within 12 months from first taking up employment by persons so employed thereafter. The Department of Health and Social Services had a discretion to extend the 12 months' time limit, but in so doing also had a discretion to vary the terms of purchase. A further amendment of the scheme was introduced by the Health Services (Superannuation) (Amendment) (No. 2) Regulations (Northern Ireland) 1983 which came into force on 12 August 1983. This removed the Department's discretion to extend the 12 months' time limit and substituted a right to purchase added years at any time until two years before an employee's retirement on fixed and progressively less favourable terms.

2

In the actions, all commenced by writ dated 30 March 1988, each plaintiff claims damages from his employer alleged to flow from the employer's failure to bring to the plaintiff's notice the right to enhance his pension entitlement by the purchase of added years on the terms available under the 1974 Regulations. The claim, as pleaded in each case, is based on the alternative grounds of breach of an implied term of the contract of employment, breach of a duty of care owed to the plaintiff and breach of statutory duty. The four actions were tried together by Carswell J. At the trial the claims based on breach of statutory duty were abandoned. The judge rejected the claims on the other two grounds. On appeal to the Court of Appeal in Northern Ireland the plaintiffs were permitted to revive the claim based on breach of statutory duty. The appeals succeeded by a majority. Kelly L.J, rejected all three grounds of claim. MacDermott L.J. held the defendants liable in each case on the sole ground of the breach of an implied term of the contract of employment. Murray L.J. held the defendants liable in each case on the sole ground of a breach of statutory duty under section 4 of the Contracts of Employment and Redundancy Payments Act (Northern Ireland) 1965. The defendant Boards now appeal by the leave of Court of Appeal.

3

Before the courts below there were also third party claims by the defendant Boards against the British Medical Association which were rejected by the Court of Appeal. These claims have not been pursued in your Lordships' House.

4

The facts as found by the trial judge are not now in issue and for the purpose of determining the questions of law on which the appeals turn it is not, I think, necessary to present more than a brief summary of the factual background. The terms on which a young doctor could purchase added years under the 1974 Regulations were highly advantageous and represented a valuable right and, as Carswell J. put it, "an opportunity not to be missed if a doctor reckoned to stay in the health services for his professional lifetime." Thus, it was of obvious importance to any young doctor employed in the health services that he should become aware of this valuable right in due time to avail himself, if he so decided, of the opportunity to purchase the necessary added years to qualify for a full pension. The four plaintiffs were first employed in the health services at different dates, but nothing turns on this save in relation to an issue of limitation to which I must later advert. In relation to the central issue of liability it is only necessary to record in summary the judge's findings: (1) that none of the plaintiffs was made aware by his employer, or otherwise became aware, at the material time of his right to purchase added years; (2) that each plaintiff, if he had been aware of the right at the material time would on the balance of probabilities have exercised the option to purchase added years; (3) that if the employing Board owed any duty to employees to bring to their notice the existence of the right it was in each case in breach of that duty.

5

The contractual claim

6

The central question then is whether the employing Boards owed any such duty. Leaving aside the claim based on breach of statutory duty, which turns on the true construction of the Act of 1965, it seems to me that the plaintiffs' common law claims can only succeed if the duty allegedly owed to them by their employers arose out of the contract of employment. If a duty of the kind in question was not inherent in the contractual relationship, I do not see how it could possibly be derived from the tort of negligence. The observations of Lord Scarman in delivering the advice of the Judicial Committee of the Privy Council in Tai Hing Cotton Mill Ltd. v. Liu Chong Hing Bank Ltd. [1986] A.C. 80, 107 are here very much in point. He said:

"Their Lordships do not believe that there is anything to the advantage of the law's development in searching for a liability in tort where the parties are in a contractual relationship. This is particularly so in a commercial relationship. Though it is possible as a matter of legal semantics to conduct an analysis of the rights and duties inherent in some contractual relationships including that of banker and customer either as a matter of contract law when the question will be what, if any, terms are to be implied or as a matter of tort law when the task will be to identify a duty arising from the proximity and character of the relationship between the parties, their Lordships believe it to be correct in principle and necessary for the avoidance of confusion in the law to adhere to the contractual analysis: on principle because it is a relationship in which the parties have, subject to a few exceptions, the right to determine their obligations to each other, and for the avoidance of confusion because different consequences do follow according to whether liability arises from contract or tort, e.g. in the limitation of action. Their Lordships respectfully agree with some wise words of Lord Radcliffe in his dissenting speech in Lister v. Romford Ice and Cold Storage Co. Ltd. [1957] A.C. 555. After indicating that there are cases in which a duty arising out of the relationship between employer and employee could be analysed as contractual or tortious Lord Radcliffe said, at p. 587:

'Since, in any event, the duty in question is one which exists by imputation or implication of law and not by virtue of any express negotiation between the parties, I should be inclined to say that there is no real distinction between the two possible sources of obligation. But it is certainly, I think, as much contractual as tortious. Since in modern times the relationship between master and servant, between employer and employed, is inherently one of contract, it seems to me entirely correct to attribute the duties which arise from that relationship to implied contract.'

Their Lordships do not, therefore, embark on an investigation as to whether in the relationship of banker and customer it is possible to identify tort as well as contract as a source of the obligations owed by the one to the other. Their Lordships do not, however, accept that the parties' mutual obligations in tort can be any greater than those to be found expressly or by necessary implication in their contract."

7

In the instant case I believe that an attempt to analyse the issue in terms of the law of tort may be positively misleading. If the question is framed in terms of the law of negligence, it takes the form: did the employers owe a duty of care to employees to save them from economic loss consequent on a failure to purchase added years of pensionable entitlement in due time? The strong trend of recent authority has been to narrow the range of circumstances which the law of tort will recognise as sufficient to impose...

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