Edwards v Chesterfield Royal Hospital NHS Foundation Trust

The Court of Appeal held that where a contract of employment incorporates express disciplinary procedures, a breach of those procedures that causes findings of professional or personal misconduct (and consequent dismissal) can give rise to damages under ordinary contractual principles beyond mere notice pay. The court treated the appeal as a preliminary issue, assumed the claimant would establish the facts pleaded and concluded that Johnson v Unisys did not extinguish a cause of action based on an express contractual term because Johnson concerned the scope of an implied term protecting against unfair dismissal. The judge endorsed the principle in Gunton v Richmond-upon-Thames that a contractual right to disciplinary procedure can extend the period for which loss of earnings is recoverable, and rejected the defendant’s contention that disciplinary rules as such are never intended to be actionable in contract.

Background and procedural posture:

• Mr Edwards was a consultant surgeon dismissed summarily by the Trust following disciplinary proceedings in breach of supposed contractual disciplinary procedures (clause 13 and clause 8 provided three months' notice).
• He contended the panel lacked a legally qualified chair and a clinician of the same discipline and that legal representation was refused; he claimed that, if procedures had been followed, no misconduct finding would have been made.
• He commenced proceedings seeking damages for breach of contract, including substantial future loss of earnings. The Trust contended recoverable damages were limited to the contractual notice period; District Judge Jones so ordered; Nicol J allowed the claimant’s appeal and applied the Gunton approach to include the period needed for proper disciplinary proceedings. The claimant appealed to the Court of Appeal.

Nature of the claim: Claim for damages for breach of contract (wrongful dismissal and failure to follow express disciplinary procedures), seeking compensation for past and future loss of earnings and loss of pension.

Issues framed by the court:

1. Whether, assuming the claimant establishes the pleaded facts, he could in law recover damages beyond loss of earnings for the contractual notice period (including the so-called Gunton extension).
2. Whether the decision in Johnson v Unisys precluded recovery of such damages, by preventing contractual or common law claims based on the manner of dismissal.
3. Whether the Human Rights Act 1998 or public‑body status altered the position.

Reasoning and conclusions:

• The court proceeded on the assumption the pleaded facts would be proved. It distinguished Johnson v Unisys as concerned with developing the common law implied term of mutual trust and confidence and held that Johnson did not decide the consequences of breach of an express contractual disciplinary term. Lord Hoffmann’s observations about disciplinary procedures in Johnson were treated as obiter and not binding on the point before the court.
• The court held that where an express contractual disciplinary procedure exists and is breached so as to cause prejudicial findings of misconduct, ordinary contractual remedies may be available and can include compensation for loss caused by those findings (the Gunton principle supports this). The so-called Johnson exclusion area does not displace claims based on express contractual terms that are independent of the implied‑term issues considered in Johnson and Eastwood.
• The court rejected the claimant’s argument that an implied term was required to prevent termination except for good cause (inconsistent with the express clause permitting three months’ notice) and rejected the Human Rights Act argument as unnecessary to decide the appeal.

Disposition: The Court of Appeal allowed the appeal, concluding the claimant is not limited to damages for the notice period alone and that the claim can proceed on the basis pleaded; assessment of quantum remains for trial.

Appeal allowed. The Court held that a breach of an express contractual disciplinary procedure which causes wrongful findings of misconduct can give rise to damages under ordinary contractual principles beyond mere notice pay. Johnson v Unisys was distinguished as concerned with implied terms and did not preclude enforcing an express disciplinary term; Gunton supports the proposition that contractual disciplinary procedures can extend recoverable loss.

District Judge Jones (Manchester District Registry) granted a declaration limiting recoverable damages to the contractual notice period (26 March 2009). Nicol J (Queen's Bench Division) [2009] EWHC 2011 (QB) allowed the claimant's appeal and held damages could include the period required for contractual disciplinary proceedings (the Gunton extension). The claimant appealed to the Court of Appeal which delivered judgment on 26 May 2010 ([2010] EWCA Civ 571).