Johnson v. Unisys Limited

The House of Lords dismissed the employee's appeal against strike-out of a claim for substantial common law damages said to arise from the manner of his dismissal. The court held that while the implied term of mutual trust and confidence (as affirmed in Mahmud v BCCI) can give rise to contractual causes of action, the existence of an elaborate statutory unfair dismissal scheme in Part X of the Employment Rights Act 1996 means that a general common law remedy for the manner of dismissal should not be developed so as to undermine the statutory scheme. The court reviewed Addis v Gramophone Co Ltd and Mahmud v BCCI, concluded that Addis's headnote was over-broad in parts but that statutory policy and coherence of employment law required that the remedy for unfair or procedurally defective dismissals remain within the tribunal system.

Background and facts:

The appellant, employed intermittently by Unisys from 1971 to 1994 and dismissed summarily in January 1994, brought county court proceedings for breach of contract and negligence alleging that the employers failed to put allegations to him, to give him an opportunity to defend himself, and to follow disciplinary procedures, and that the manner of dismissal caused a major psychiatric illness and loss of future earnings (claimed at about 400,000). He had previously succeeded in an unfair dismissal claim before an industrial tribunal which awarded a compensatory sum subject to contribution and statutory maxima.

Procedural history:

• Employment tribunal: unfair dismissal upheld (decisions 20 February 1995 and 26 July 1995).
• Milton Keynes County Court: particulars of claim struck out.
• Court of Appeal: appeal dismissed (reported [1999] 1 All ER 854) and permission to amend particulars contemplated but the appeal ultimately failed.
• House of Lords: appeal dismissed (this judgment).

Nature of claim and issues:

• Claim in contract (and alternatively in tort) for financial loss caused by the manner of dismissal, founded on an implied term of mutual trust and confidence and other implied terms.
• Key issues: (i) the effect and scope of Addis v Gramophone Co Ltd; (ii) the impact of Mahmud v BCCI on Addis and on implied terms; (iii) whether a common law cause of action for the manner of dismissal can co-exist with the statutory unfair dismissal regime; (iv) remoteness and causation; and (v) interaction with express contractual notice provisions and disciplinary procedures.

Court's reasoning:

• The House considered whether Addis precludes recovery of pecuniary loss caused by the manner of dismissal and concluded that the headnote of Addis is wider than its actual ratio and its restrictive formulation has been eroded by subsequent developments. Mahmud established that damages may be recoverable for loss flowing from a breach of an independently actionable implied term such as mutual trust and confidence.
• Despite doctrinal openness to implying contractual duties regulating the manner of dismissal, the court emphasised that Parliament has created a specialised statutory scheme (Part X of the Employment Rights Act 1996) providing remedies, procedural routes, limits on awards and exclusions for certain classes of employees. Developing a parallel and potentially unlimited common law remedy would subvert Parliament's balance of policies, circumvent statutory limits, and undermine specialist tribunal jurisdiction.
• Practical difficulties of causation and remoteness in claims for psychiatric injury and financial loss arising from dismissal were noted; on the facts the House accepted that remoteness and causation presented real evidential obstacles to the appellant's claim.

Relief sought: damages in contract and tort for loss said to result from the manner of dismissal.

Disposition: the appeal was dismissed for the reasons given above.

Appeal dismissed. The House held that although the implied obligation of mutual trust and confidence can in principle support claims based on unfair or oppressive conduct, it would be inappropriate to develop a general common law remedy for the manner of dismissal that would circumvent the statutory unfair dismissal scheme (Part X of the Employment Rights Act 1996). On the facts, remoteness and causation also presented serious obstacles to the appellant's claim.

Employment tribunal: complaint of unfair dismissal upheld (20 February 1995; 26 July 1995). Milton Keynes County Court: particulars of claim struck out. Court of Appeal: appeal dismissed (reported [1999] 1 All ER 854). House of Lords: appeal dismissed ([2001] UKHL 13).