Johnson (AP) v. Unisys Limited

The common law cannot provide a general damages remedy for unfairness in the manner of dismissal. Such a remedy would duplicate the statutory right under Part X of the Employment Rights Act 1996 while evading Parliament’s limits on eligibility, compensation, time and forum.

The implied term of trust and confidence protects the continuing employment relationship. It cannot be extended to create an independently actionable right to fair dismissal. The same statutory policy precludes achieving that result through a tortious duty of care.

Wrongful dismissal damages remain compensation for breach of the contractual notice obligation. Loss caused by breach of a genuinely independent contractual term may be recoverable, but courts must not imply such a term merely to reproduce the statutory unfair dismissal remedy.

Johnson was summarily dismissed by Unisys Limited without a fair opportunity to answer allegations and without compliance with the company’s disciplinary procedure. An industrial tribunal found the dismissal unfair and awarded compensation at the applicable statutory maximum.

He subsequently brought County Court proceedings in contract and tort. He alleged that the manner of dismissal breached implied employment obligations, particularly the term of mutual trust and confidence, and caused psychiatric illness and continuing unemployment. He claimed financial loss exceeding £400,000.

The County Court struck out the action. The Court of Appeal dismissed his appeal in [1999] 1 All ER 854. The central issue before the House was whether the common law could provide damages for loss caused by the unfair manner of dismissal notwithstanding the statutory unfair dismissal scheme in Part X of the Employment Rights Act 1996.

1. Appeal dismissed unanimously. Lord Hoffmann delivered the principal majority speech. Lord Millett agreed fully with it, and Lord Bingham agreed with both Lord Hoffmann and Lord Millett. Lord Nicholls reached the same conclusion because a common law right concerning the manner of dismissal could not satisfactorily coexist with the statutory unfair dismissal regime.

2. Per Lord Hoffmann and Lord Millett, the courts must develop employment law consistently with Parliament’s policy. Part X of the Employment Rights Act 1996 created a specialist system for unfair dismissal, including eligibility conditions, short time limits, contribution rules, specialist tribunals and a maximum compensatory award. A parallel common law remedy for unfair circumstances attending dismissal would defeat those deliberate restrictions.

3. The implied term of trust and confidence, affirmed in Mahmud v Bank of Credit and Commerce International SA [1998] AC 20, protects the continuing employment relationship. It was inappropriate to use that term to extend the relationship beyond its agreed termination or to create a common law right to fair dismissal. Although a separate obligation to exercise dismissal powers fairly or in good faith was jurisprudentially possible, creating it after Parliament had occupied the field was neither necessary nor consistent with legislative policy.

4. The same reasoning defeated the negligence claim. A tortious duty of care could not be imposed to produce the remedy which the statutory scheme prevented the courts from creating in contract.

5. Wrongful dismissal ordinarily concerns failure to give contractual notice or payment in lieu. The accepted core of Addis v Gramophone Co Ltd [1909] AC 488 remained applicable. That decision did not prevent recovery for loss caused by breach of a genuinely independent contractual obligation, as illustrated by Mahmud, but no independently actionable dismissal obligation could be created here.

6. Lord Hoffmann further considered that disciplinary procedures recorded against the statutory background were not intended to create independently actionable common law duties circumventing the unfair dismissal limits. They might affect entitlement to dismiss summarily without notice, but did not qualify the common law power to terminate on proper notice.

7. Lord Steyn agreed that the appeal should be dismissed, but on a separate basis. He considered that the implied term of trust and confidence could apply to disciplinary proceedings and dismissal and that the claimant had disclosed a reasonable contractual cause of action. He nevertheless concluded that there was no realistic prospect of overcoming the remoteness obstacle.

1. House of Lords: The appeal in Johnson (AP) v Unisys Limited [2001] UKHL 13 was dismissed unanimously.

2. Court of Appeal: The employee’s appeal was dismissed in [1999] 1 All ER 854. The court held that the substance of the claim concerned the manner of dismissal and disclosed no sustainable common law cause of action.

3. Milton Keynes County Court: Judge Ansell struck out the contractual and negligence claims as disclosing no common law cause of action.