Yapp v Foreign and Commonwealth Office

The Court of Appeal held that the Foreign and Commonwealth Office acted in breach of the claimant’s contract by withdrawing him from his post as High Commissioner without affording the preliminary enquiries and opportunity to respond which fairness required under the appointment letter and the contractual duty of mutual trust and confidence (the Malik term). The court also found that the disciplinary process was in substance fair, save for the investigator performing both fact-finding and the disciplinary decision, which was a procedural defect but caused no additional loss. The court allowed the appellant’s appeal only in respect of remoteness: on the facts the claimant’s depressive illness was not a reasonably foreseeable consequence of the withdrawal in the absence of evidence of pre-existing vulnerability, so psychiatric injury and its financial consequences were too remote to be recoverable. The case was remitted to the High Court to determine quantum on the contractual claims (unless agreed). The FCO’s appeal against the judge’s interest decision was dismissed.

Background and parties: The claimant was appointed British High Commissioner in Belize. In June 2008, after representations by a local politician and following internal reports, the FCO withdrew and suspended him pending investigation. A fact-finding investigation and disciplinary process followed; some bullying findings were upheld and a written warning given. The claimant developed depressive illness and later heart disease and did not return to an overseas appointment before retirement. He sued the FCO in May 2011 for breach of contract and breaches of the employer’s duty of care, seeking damages for loss of office, psychiatric injury and consequential pecuniary loss; the FCO appealed the judge’s verdict.

Nature of the claim / relief sought: Damages for breach of express contractual terms (appointment letter and HR Guidance), damages for breach of implied term of mutual trust and confidence and for breach of the common law duty of care (psychiatric injury), and interest on the award.

Issues framed:

• Whether the FCO lawfully exercised its contractual power to withdraw the claimant on "operational" grounds and whether it breached the obligation of fair treatment under the contract and/or the implied Malik term.
• Whether the disciplinary investigation and hearing were conducted fairly, including whether the investigator could properly perform both investigatory and decision-making roles.
• Causation and remoteness: whether the claimant’s depressive illness and its financial consequences were caused by the withdrawal and whether such psychiatric injury was too remote to be recoverable.
• Whether interest should be awarded on the agreed damages while sums were held by the claimant’s solicitors pending appeal.

Court’s reasoning and outcome: The Court of Appeal (Underhill LJ, with Davis and Patten LJJ agreeing) affirmed Cranston J’s finding that the withdrawal was a contractual breach because fairness required basic enquiries and disclosure of the allegations and an opportunity to respond before effecting a final withdrawal; confidentiality to the informant did not justify dispensing with fair treatment. The disciplinary process was largely fair; the dual role of investigator/decision-maker was a breach of natural justice in principle but produced no additional loss given the outcome. On causation the court accepted that the withdrawal caused the loss of the post and that the withdrawal contributed to the claimant’s distress, but concluded that psychiatric injury was too remote: absent signs of vulnerability the employer is ordinarily entitled to assume reasonable fortitude and psychiatric injury from a one-off operational withdrawal was not reasonably foreseeable. Accordingly the appeal was allowed in part (remoteness/common law duty) and dismissed in part (breach of contract and causation); the matter was remitted for quantum on contractual heads. The appeal against interest was dismissed and the judge’s order on interest was upheld.

Appeal allowed in part. The Court dismissed the FCO’s challenge to the judge’s finding that the immediate withdrawal without preliminary enquiries and without putting the allegations to the claimant breached his contract (including the implied term of mutual trust and confidence). It accepted that the disciplinary process was in substance fair though it criticised the investigator conducting both stages as a procedural defect that caused no loss. However, the court allowed the FCO’s appeal on remoteness: psychiatric injury and its financial consequences were not reasonably foreseeable on these facts in the absence of a known vulnerability, so damages for depression were too remote. The case was remitted to the High Court to determine quantum on the contractual claims. The FCO’s appeal against the judge’s interest award was dismissed.

Appeal from the High Court, Queen's Bench Division (Cranston J) [2013] EWHC 1098 (QB) to the Court of Appeal, neutral citation [2014] EWCA Civ 1512. The Court of Appeal allowed the appeal in part (on remoteness/common law duty) and dismissed it in part (upholding breach of contract and causation findings); remitted to the High Court on quantum. The FCO’s appeal on interest was dismissed.