Edwards v Chesterfield Royal Hospital NHS Foundation Trust

The Supreme Court held that damages for loss arising from the manner of a dismissal are excluded from ordinary common law contractual damages where Parliament has provided a statutory code for unfair dismissal. The reasoning in Johnson v Unisys Ltd applies to claims founded on express contractual terms implementing disciplinary procedures: incorporation of such procedures into the contract does not, in the ordinary case and absent express agreement to the contrary, confer a free‑standing common law right to recover damages for stigma or other loss caused by findings in a dismissal process. The court followed the approach in Eastwood and delineated the boundary of the "Johnson exclusion area": where the cause of action and financial loss arise independently and prior to dismissal (for example, loss caused by suspension or pre‑dismissal psychiatric injury) a common law claim can survive; where the complained‑of conduct and resulting loss are part of the dismissal process itself the statutory unfair dismissal scheme is the exclusive remedial forum.

Background and parties: The appeals concerned two claims by dismissed employees (Edwards and Botham) who alleged they had suffered financial loss and reputational damage as a result of disciplinary proceedings that did not comply with contractual disciplinary procedures. Both respondents sued in the High Court for damages for breach of contract. The defendants were Chesterfield Royal Hospital NHS Foundation Trust and the Ministry of Defence respectively.

Procedural posture: The cases came to the Supreme Court on appeal from the Court of Appeal ([2010] EWCA Civ 571) and the High Court ([2010] EWHC 646 (QB)). The Court of Appeal had reached different results in the two cases, allowing Edwards’ claim in principle; the Ministry of Defence’s appeal was permitted to the Supreme Court by consent.

Nature of the claims and relief sought: Each claimant sought common law damages for breach of contract arising from procedural failures in disciplinary processes which the claimants alleged led to damaging findings and loss of future earnings (including loss of reputation). Mr Edwards combined a stigma claim with a wrongful dismissal claim; Mr Botham had obtained tribunal awards for unfair and wrongful dismissal and then pursued further contractual damages in the High Court.

Issues framed: (i) Whether the reasoning in Johnson v Unisys precludes recovery of damages for loss arising from the unfair manner of dismissal when the claim is founded on an express contractual term governing disciplinary procedure; (ii) whether, on the facts pleaded, the claims fell within the Johnson exclusion area or were independent causes of action that accrued prior to dismissal.

Court’s reasoning: The court reviewed the statutory history (including the Industrial Relations Act 1971, the Employment Rights Act 1996 and subsequent statutes and regulations) showing Parliament had created a statutory code for unfair dismissal and had linked disciplinary procedures to that statutory regime (sections 1 and 3(1) of the 1996 Act, provisions introduced by the Employment Act 2002, the later repeal and reform in the Employment Act 2008 and related ACAS codes). The court concluded that, absent an express agreement to the contrary, contractual disciplinary procedures are intended to operate within and not to circumvent the statutory unfair dismissal scheme. Consequently, damages for loss arising out of the manner of dismissal are precluded at common law by the Johnson principle, and the "Johnson exclusion area" extends to claims grounded in express disciplinary terms when the loss is part of the dismissal process. The court distinguished exceptional cases where a cause of action and loss arise before dismissal (for example, suspension or pre‑dismissal psychiatric injury) which remain actionable at common law.

Subsidiary findings and consequences: The court emphasised that injunctions or declaratory relief remain available to restrain or remedy threatened breaches of contractual disciplinary procedures, and that the statutory unfair dismissal remedies remain the proper forum for complaints about dismissal and its consequences. The Supreme Court allowed the appeals of the Trust and the MoD, setting aside the Court of Appeal’s consent order in Botham.

Appeals allowed. The Supreme Court held that the Johnson v Unisys principle bars recovery of common law damages for loss arising from the manner of dismissal even where the claim is founded on express contractual disciplinary procedures incorporated into the employment contract, because Parliament’s statutory code for unfair dismissal occupies that field; only losses that arise independently of dismissal (for example losses caused by suspension or pre‑dismissal psychiatric injury) remain actionable at common law.

On appeal from the Court of Appeal ([2010] EWCA Civ 571) and the Queen's Bench Division, High Court ([2010] EWHC 646 (QB)). The High Court (Slade J) had dismissed Botham’s contractual claim; the Court of Appeal (Pill LJ) later allowed Botham’s appeal by consent (31 August 2010). In Edwards’ case the Court of Appeal (Moore‑Bick LJ) had allowed the claimant’s stigma claim in principle. The Supreme Court reversed and allowed the appeals of the Trust and the Ministry of Defence ([2011] UKSC 58).