Eastwood & Anor v. Magnox Electric Plc

The House held that employees may bring common law claims for loss (including financial loss consequent on psychiatric injury) caused by wrongful conduct of their employer which accrued before dismissal and which is independent of the dismissal itself. The decision in Johnson v Unisys Ltd does not extinguish accrued common law causes of action arising prior to dismissal. The court drew a distinction between (a) loss flowing from the dismissal itself, which falls within the statutory unfair dismissal code, and (b) loss arising from antecedent breaches of contractual obligations (notably the implied term of mutual trust and confidence) which give rise to independent common law causes of action.

The House allowed the appeals of Mr Eastwood and Mr Williams (permitting their common law claims to proceed to trial) and dismissed Mr McCabe's appeal, on the basis that, on the assumed facts, the three claimants had causes of action which accrued before dismissal and that those claims should not be defeated by the statutory unfair dismissal code.

Background and parties:

• The appeals arise from claims by long-serving employees who alleged that management conduct during disciplinary processes caused psychiatric injury and financial loss. The primary defendants were Magnox Electric Plc (Eastwood and Williams) and Cornwall County Council and school governors (McCabe).

Procedural history:

• Eastwood and Williams: proceedings began in the County Court and were summarily dismissed by the judge (no reasonable prospect of success); the Court of Appeal upheld that dismissal (see [2002] IRLR 447). The case came to the House of Lords by way of appeal.
• McCabe: initially dismissed at first instance in the High Court (Judge Overend struck out the claim: [2002] EWHC 3055 (QB)); the Court of Appeal allowed an appeal and ordered the action to proceed ([2002] EWCA Civ 1887, [2003] ICR 501). The House heard appeals arising from these decisions.

Nature of the claims and relief sought (i):

• The claimants sought damages in common law (contract and negligence) for psychiatric injury and financial loss said to have been caused by an orchestrated course of conduct using disciplinary machinery. They sought to pursue these common law claims in court despite having brought or being entitled to bring statutory unfair dismissal complaints to employment tribunals.

Issues framed by the court (ii):

• Whether the decision in Johnson v Unisys Ltd precluded common law actions by employees for loss arising from the manner and conduct of the employer in disciplinary procedures leading to dismissal.
• Where the boundary lies between matters exclusively within the statutory unfair dismissal regime and matters constituting independent common law causes of action which accrued prior to dismissal.

Court's reasoning and conclusion (iii):

• The House analysed the distinction between loss caused by dismissal (within the statutory unfair dismissal code) and loss caused by antecedent breaches of duties (notably the implied term of mutual trust and confidence) which give rise to independent causes of action before dismissal. The court accepted that, exceptionally, psychiatric injury or other loss caused by pre-dismissal conduct may create a separate common law claim that survives or precedes dismissal.
• The court recognised practical difficulties and anomalous results arising from this boundary (duplication of proceedings, artificial severance of a continuous course of conduct, possible incentives to employers to dismiss rather than suspend). It noted these issues merit consideration by Parliament.
• Applying these principles on the assumed facts, the House allowed Eastwood and Williams to proceed to trial on their common law claims and dismissed Eastwood v Magnox's earlier dismissal; it dismissed McCabe's appeal (upholding that in his case the appeal should be dismissed), concluding on the assumed facts the three employees had causes of action which accrued before dismissal and should proceed to trial where appropriate.

This was an appellate decision. The House allowed the appeals of Mr Eastwood and Mr Williams and dismissed the appeal in Mr McCabe's case. The court held that where an employee's cause of action in contract or tort accrues before dismissal — for example loss caused by psychiatric injury arising from unfair treatment during suspension or investigatory processes — that cause of action is not extinguished by the statutory unfair dismissal code and may proceed in the civil courts. However, loss flowing directly from the dismissal itself remains within the statutory unfair dismissal scheme. The court emphasised the practical difficulties of this boundary and suggested that legislative attention was required.

Appeals to the House of Lords from decisions at first instance and on appeal: Eastwood and Williams — County Court (Judge Elystan Morgan) summary dismissal; Court of Appeal [2002] IRLR 447 (appeal upheld); appeal to House of Lords [2004] UKHL 35. McCabe — High Court (Judge Overend) struck out the claim ([2002] EWHC 3055 (QB)); Court of Appeal allowed an appeal ([2002] EWCA Civ 1887, [2003] ICR 501); appeal to House of Lords [2004] UKHL 35.