Edwards v Chesterfield Royal Hospital NHS Foundation Trust

In the absence of express contrary agreement, an employee cannot recover common law damages for loss arising from an employer’s breach of an express contractual disciplinary procedure where the loss forms part of the dismissal process. Such claims fall within the statutory territory of unfair dismissal and its prescribed limits.

A common law claim remains available where a cause of action accrues before dismissal and the loss is independent of it. Injunctive or declaratory relief may also enforce a contractual procedure without undermining the statutory scheme. Findings which constitute the reasons for dismissal ordinarily form part of that process; they cannot be separated merely by characterising the resulting loss as reputational damage.

Two conjoined appeals concerned employees dismissed for alleged gross misconduct after disciplinary procedures which, on the assumed facts, breached express terms of their employment contracts. Each sought substantial common law damages for reputational harm and consequent loss of employment prospects.

In Mr Edwards’s proceedings, Nicol J, [2009] EWHC 2011 (QB), limited recoverable wrongful-dismissal damages to the notice period and the additional period reasonably required to conduct the disciplinary procedure. The Court of Appeal, [2010] EWCA Civ 571, held that his separate reputational-loss claim fell outside the Johnson exclusion area.

Slade J dismissed Mr Botham’s claim in [2010] EWHC 646 (QB). The Court of Appeal subsequently allowed his appeal by consent. The Supreme Court considered whether the exclusion governing damages for the manner of dismissal extends to breach of express disciplinary terms and whether each claim was independent of dismissal.

1. Both appeals allowed. By a majority, the court held that the unfair-dismissal legislation precludes common law damages for loss arising from the manner of dismissal, whether the claim alleges breach of the implied term of trust and confidence or breach of an express contractual disciplinary procedure. Lord Dyson, with whom Lord Walker agreed, delivered the principal judgment. Lord Phillips and Lord Mance agreed in the result and supplied additional reasoning.

2. The statutory scheme links compliance with disciplinary procedures to unfair-dismissal adjudication and carefully limits eligibility, time, compensation and forum. Unless the parties expressly agree otherwise, contractual disciplinary procedures are therefore not intended to create an independent damages remedy which circumvents that scheme. Lord Phillips reached the same result through the rule in Addis concerning recoverable loss and considered that permitting stigma damages for breach of a disciplinary procedure would undermine Johnson and Eastwood.

3. The boundary depends upon the source of the loss. A cause of action acquired before dismissal remains available where it precedes and exists independently of dismissal. Loss caused by suspension or pre-dismissal psychiatric injury may qualify. Loss arising from steps which form part of the dismissal process falls within the exclusion. The inquiry is fact-specific.

4. Mr Edwards’s adverse disciplinary findings were the reasons for his dismissal and were communicated as part of the dismissal process. His reputational-loss claim could not be separated from the dismissal. Mr Botham’s claim was stronger against him because his pleaded reputational and employment losses, including his placement on the POCA register, were expressly consequential upon dismissal.

5. Breach of a contractual disciplinary procedure may support an injunction or declaration before dismissal. Those remedies do not create competing systems of compensation. Mr Botham could not recover the costs of representation in the disciplinary proceedings because his own culpable conduct caused those proceedings. Nor could he recover tribunal or appeal-tribunal costs as damages, since that would circumvent the costs policy of the statutory regime.

6. Lady Hale would have dismissed both appeals because express contractual rights should attract ordinary contractual remedies. Lord Kerr, with whom Lord Wilson agreed, would have dismissed the Trust’s appeal in Mr Edwards’s case because he regarded the reputational findings as independently actionable, but would have allowed the Ministry’s appeal in Mr Botham’s case.

1. Supreme Court: Allowed the Trust’s and Ministry of Defence’s appeals and restored the conclusion that the claimed reputational and consequential losses were not recoverable as common law damages.
2. Court of Appeal: In Mr Edwards’s case, [2010] EWCA Civ 571, held that the reputational-loss claim fell outside the Johnson exclusion area. Mr Botham’s appeal was subsequently allowed by consent in reliance on that decision.
3. High Court: In Mr Edwards’s case, Nicol J, [2009] EWHC 2011 (QB), limited damages to the notice period and the period reasonably required for a proper disciplinary process. In Mr Botham’s case, Slade J, [2010] EWHC 646 (QB), dismissed the claim as falling within the Johnson exclusion area.