Compensation for injury to feelings


Dunnachie v Kingston upon Hull City Council [2004] IRLR 727



The House of Lords unanimously upheld an appeal against the decision of the Court of Appeal reported at [2004] IRLR 287.


It is not open to an employment tribunal to include an award for injury to feelings in the compensatory award for unfair dismissal. In contrast to the relevant sections of the legislation prohibiting discrimination on the grounds of sex, race and disability, section 123(1) of the Employment Rights Act 1996 only permits recovery of pecuniary loss.


On the 'expansive interpretation' adopted by Lord Justice Sedley in the Court of Appeal, there would be nothing on the face of the statute to exclude an award of aggravated or exemplary damages. And, according to Lord Steyn: 'This could not have been intended. The better view is that the provision was not intended ... to provide for "palm tree" justice'.



The decision in Norton Tool Co Ltd v Tewson [1972] IRLR 86, that only economic loss could be compensated, was generally assumed to be correct and was consistently applied at all levels until called into question by the observation of Lord Hoffman in Johnson v Unisys Ltd [2001] IRLR 279. That observation was obiter and not introduced in the language of a Law Lord inviting the House to overrule a long-standing decision on a point of statutory construction that was not in issue and not explored in opposing arguments (see [2004] Gazette,11 March, 27; [2004] Gazette, 2 September, 34).



Eastwood and another v Magnox Electric Plc and another case [2004] IRLR 733



The House of Lords held that if, before his dismissal, an employee has acquired a cause of action at law for breach of contract or otherwise, that cause of action remains unimpaired by the subsequent dismissal and the statutory rights flowing from that dismissal. Johnson v Unisys Ltd established a line of demarcation between events leading up to dismissal, and the dismissal itself. In respect of the former, the implied term of trust and confidence applies, and a claim at common law may be made. In respect of the latter, the implied contractual obligation to act fairly does not apply and an employee's remedy for unfair dismissal is that provided by the Employment Rights Act 1996.



Ordinarily, an employer's failure to act fairly in the steps leading to dismissal does not of itself cause the employee financial loss. The loss arises when the employee is dismissed. Exceptionally, however, financial loss may flow directly from the employer's failure to act fairly when taking steps leading to dismissal.


Financial loss flowing from suspension is an example. Another is where an employee suffers financial loss from psychiatric or other illness caused by his pre-dismissal unfair treatment. In such cases, the employee has a common law cause of action that precedes, and is independent of, his subsequent dismissal.


But if an employer brings proceedings in both the court and the employment tribunal, he cannot recover any overlapping heads of loss twice over. The House of Lords acknowledged that drawing a boundary between common law rights and remedies and statutory rights and remedies has some undesirable consequences.


Lord Nicholls observed:'[the position is] not satisfactory. The difficulties arise principally because of the cap on the amount of compensatory awards for unfair dismissal. Although the cap was raised substantially in 1998, at times tribunals are still precluded from awarding full compensation for a dismissed employee's financial loss. So, understandably, employees and their legal advisors are seeking to side-step the statutory limit by identifying elements in the events preceding dismissal, but leading up to dismissal, which can be used as pegs on which to hang a common law claim for breach of an employer's implied contractual obligation to act fairly. This situation merits urgent attention by the government and the legislature' (see [2004] Gazette, 19 August, 36).



Scott v Commissioners of Inland Revenue [2004] IRLR 713



The Inland Revenue dismissed a male employee against whom a female colleague had made allegations of sexual harassment.


The tribunal found that he had been unfairly and wrongfully dismissed, discriminated against on grounds of both sex and disability, and had been victimised. Compensation of almost £100,000 was awarded.


The Court of Appeal said the tribunal did not err in making separate awards for injury to feelings for unlawful discrimination and aggravated damages. Aggravated damages are intended to deal with cases where the injury was inflicted by conduct that was high-handed, malicious, insulting or oppressive.


Therefore, they should not be aggregated with and treated as part of damages for injury to feelings.


However, the tribunal had erred in awarding only £15,000 for the psychiatric harm done to the applicant on the basis that there was a good chance that the majority of his symptoms of depression would disappear within 12 months. The Judicial Studies Board guidelines place 'moderately severe' psychiatric damage in a bracket between £10,000 and £28,500. Had the tribunal not relied on what it thought was an optimistic prognosis, it said that it would have made an award near, and possibly above, the top end of the 'moderately severe' bracket. Therefore, the case was remitted for the tribunal to reappraise the award for psychiatric damage.



By Martin Edwards, Mace & Jones, Liverpool