Silvey v Pendragon Plc

Where an employer’s repudiatory breach dismisses an employee without contractual notice, damages are assessed by reference to the pay, benefits and pension rights the employee would have received during the notice period. The employee need not establish that employment actually continued. Acceptance of the repudiation does not, without more, waive the right to claim the full contractual damages. A payment in lieu may settle or limit the claim only through agreement, waiver, estoppel, election or unequivocal conduct. Contractual remoteness requires loss of the relevant type to have been within the parties’ reasonable contemplation at the time of contracting as a not unlikely result of the breach. Loss of enhanced pension rights on reaching a customary pension threshold was not too remote.

Maurice Silvey had approximately 38 years’ service with Pendragon Plc. The company dismissed him without giving his contractual 12 weeks’ notice, paying sums described as payment in lieu of notice, redundancy pay and holiday pay. He was dismissed 12 days before his fifty-fifth birthday, when his pension entitlement would have increased substantially.

The Employment Tribunal found a breach of contract but rejected his claim for the additional pension rights, treating the loss as caused by the chosen termination date. The Employment Appeal Tribunal dismissed his appeal, relying on Dixon v Stenor Ltd [1973] IRLR 28. The central issues were the effect of accepting payment in lieu of notice, the proper measure of damages, and whether the pension loss was too remote.

1. Appeal allowed. The dismissal was a repudiatory breach because Pendragon was not entitled to terminate the contract without 12 weeks’ notice. Mr Silvey elected to accept the repudiation, so his employment ended on 6 November 1997. That did not prevent him claiming damages assessed by asking what he would have received had the contract continued for the notice period.
2. The damages therefore included wages, bonus, holiday pay and pension rights which would have accrued during the notice period. The lost pension rights arose from the wrongful termination without notice, not from an independent choice of termination date. The Employment Tribunal was plainly wrong to distinguish the pension loss from the underpaid wages.
3. Dixon v Stenor Ltd [1973] IRLR 28 established that employment did not continue during a period covered by payment in lieu. It did not decide the measure of damages for wrongful dismissal. The Employment Appeal Tribunal was right only insofar as it rejected a claim based on employment having actually continued.
4. The contractual damages claim could be limited by a binding settlement, waiver, election, estoppel or clear and unequivocal representation or conduct. No such agreement or representation was established.
5. Applying the contractual remoteness principles in Hadley v Baxendale (1854) 9 Ex 341 and The Heron II [1969] 1 AC 350, the relevant question concerned the type or kind of loss and the information available when the contract was made, while having regard to the actual breach. Loss of pension rights was not unlikely where pension values commonly increased with service and at thresholds such as 55. The £5,788.57 loss was therefore recoverable and not too remote.
6. The order was: appeal allowed, with costs assessed at £6,102.73.

• Employment Tribunal: found breach of contract and awarded additional notice pay and redundancy pay, but rejected the claim for lost pension rights.
• Employment Appeal Tribunal: dismissed the appeal, relying on Dixon v Stenor Ltd [1973] IRLR 28.
• Court of Appeal (Civil Division): allowed the appeal and held that the pension loss was recoverable damages for dismissal without notice.