Damages - Contracts - Disciplinary procedures - Wrongful dismissal

Michael Steven Delawar Edwards v Chesterfield Royal Hospital NHS Foundation Trust: CA (Civ Div) (Lords Justice Ward, Lloyd, Moore-Bick): 26 May 2010

The appellant surgeon (E) appealed against a decision ([2009] EWHC 2011 (QB)) concerning the amount of ­damages he could claim in a wrongful dismissal action against the ­respondent NHS Trust.

E had been summarily dismissed for gross professional and personal misconduct. E issued proceedings on the basis that the Trust had failed to correctly follow the disciplinary procedure as described in his statement of employment particulars and that, if the procedure had not been defective, a finding of misconduct would not have been made against him. He sought damages of around £4.3m for breach of contract, which comprised expenses and loss of earnings up to the date of the proceedings, future loss of earnings to retirement and future loss of pension. The Trust applied to strike out E’s claim for damages insofar as it exceeded his entitlement to loss of earnings for his three months’ contractual notice period. The judge declared that E’s claim was limited to loss of earnings during his notice period. On appeal against that order, it was held that if E’s substantive claim succeeded, he was entitled to recover damages not only for loss of earnings during his contractual notice period, but also in respect of the period during which he would have remained employed while the disciplinary process ran its course.

The question on the instant appeal was whether a person who suffered damage and loss of status as a result of being dismissed following findings of personal or professional misconduct in disciplinary proceedings conducted in breach of contract, but which would otherwise not have been made, could recover damages at large. E submitted that since his contract of employment did not exclude liability for the type of loss he was seeking to recover, he was entitled to be compensated in full. The Trust argued, in reliance on Johnson v Unisys Ltd [2001] UKHL 13, [2003] 1 AC 518, that the law precluded recovery of substantial damages for breach of disciplinary procedures incorporated into a person’s contract, and that E’s claim had to be assessed in accordance with the principles in Gunton v Richmond upon Thames LBC [1981] Ch 448 CA (Civ Div). E maintained that following the coming into force of the Human Rights Act 1998, the decision in Gunton should no longer be regarded as representing the law, since public authorities, as monopoly employers, were obliged to treat their employees fairly and could be held liable in breach of contract if they failed to do so.

Held: (1) The ratio of Johnson, properly construed, was that the common law did not imply into a contract of employment a term that the employer will not act unfairly towards an employee in relation to his dismissal and that the courts could not develop the common law implied term of trust and confidence in order to give rise to such an obligation. However, the speeches in Johnson recognised that, where a breach of contract by an employer could be identified, the employee was entitled to obtain any remedy available to him under the general law. Assuming that E succeeded in his substantive claim, it was difficult to see why he should not be entitled to recover damages for the Trust’s breach of contract in accordance with ordinary principles, Johnson applied. The passages in Johnson on which the Trust relied were obiter. There had clearly been no intention in that case to cast doubt on the decision in Gunton and all that the passages relied on by the Trust amounted to, was a view that a disciplinary provision included within a statement of employment particulars was not normally intended to be contractually binding, Gunton followed. There was no reason in principle why the parties should not be able to agree that such a provision was binding.

(2) There was no suggestion in any of the authorities relied upon by the Trust that damages for the loss of opportunity to hold another full-time appointment with the NHS as a surgeon were too remote to be recoverable. The Trust’s argument had not therefore engaged directly with the issue to be determined and had sought to extend the effect of Johnson beyond its proper sphere, Eastwood v Magnox Electric Plc [2004] UKHL 35, [2005] 1 AC 503 considered. The proposition that a breach of contract in the form of a failure to comply with an agreed disciplinary procedure gave rise to no claim was difficult to accept in principle and was difficult to reconcile with Gunton, which supported the conclusion that a term of that kind had legal effect and was capable of sounding in damages, Skidmore v Dartford and Gravesham NHS Trust [2003] UKHL 27, [2003] 3 All ER 292 applied and Botham v Ministry of Defence (2010) EWHC 646 (QB) doubted.

(3) (Obiter) E’s submission concerning the 1998 act could not succeed. It involved implying into a contract of employment a term that the Trust would not terminate his contract other than for a good cause, thereby giving him the right to remain in his post until normal retirement age. On the facts and evidence that would be incompatible with various aspects of E’s contract.

Appeal allowed.

Mary O’Rourke QC, Oliver Williamson (instructed by Ryan Solicitors) for the appellant; Mark Sutton, Marcus Pilgerstorfer (instructed by Beachcroft) for the respondent.