Robert Mackenzie v AA Limited (formerly AA Plc) & Anor.

Where a contract provides alternative lawful methods of performance, damages for breach are assessed on the assumption that the defendant would have chosen the method least burdensome to it and least beneficial to the claimant. An express payment-in-lieu-of-notice clause ordinarily makes immediate termination the relevant counterfactual. The rule remains binding, but the cheapest or quickest course is not invariably least burdensome. A different approach may apply where there is a single contractual obligation and discretion over its performance, requiring factual inquiry. On the clear facts, retaining an unfit chief executive on notice was implausible. The bonus and ancillary-benefits claims were therefore unarguable, and the related share claim failed.

The appellant, formerly chairman and chief executive of the AA, was employed by Automobile Association Developments Ltd. After a public assault on a subordinate, he resigned his directorships and asked to be released from his 12-month notice obligation. The employer instead summarily dismissed him for gross misconduct.

He brought wrongful-dismissal proceedings. For the interlocutory applications, the judge proceeded on the assumption that the dismissal was wrongful. The judge struck out claims for bonus and ancillary employment benefits and gave summary judgment against the claim concerning management incentive shares. The personal-injury ruling was not appealed. The central issue was whether damages should be assessed on a counterfactual involving notice and continued benefits, or by reference to the contractual payment-in-lieu-of-notice mechanism.

Appeal dismissed. The applications below were made under the Civil Procedure Rules 1998, rules 3.4(2)(a) and 24.2. The court proceeded on the assumption that the summary dismissal was wrongful.

1. Least-burdensome performance. The rule stated in Cockburn v Alexander (1848) 6 C.B. 791 and Robinson v Robinson (1851) 1 De GM&G 247, and applied in Lavarack v Woods of Colchester Ltd [1967] 1 QB 278, remains sound and binding. Where a contract permits alternative methods of performance, damages assume that the defendant performs its legal obligations, and nothing more, by the method least burdensome to it and least profitable to the claimant. The Court of Appeal could not depart from the consistent line of authority, recently cited at the highest level in Geys v Société Générale, London Branch [2012] UKSC 63.
2. Employment contracts. An express payment-in-lieu-of-notice clause gives the employer a choice between requiring work during notice and terminating immediately on payment in lieu. It is a particularly clear case for applying the rule. The rule does not, however, create a universal equation between least burdensome, cheapest and quickest. Where there is a single contractual obligation with discretion over performance, as in Horkulak v Cantor Fitzgerald [2004] EWCA Civ 1287 and Durham Tees Valley Airport Ltd v BMIbaby Ltd [2010] EWCA Civ 485, factual inquiry may be required. Rigby v Ferodo Ltd [1988] ICR 29 concerned an unaccepted repudiation and did not alter the rule for an employer choosing between lawful termination methods. The court noted, without deciding, that some future cases might raise an objective question about the less burdensome alternative. Bold v Brough, Nicholson & Co [1964] 1 WLR 201 illustrated the exceptional possibility of an employer theoretically choosing a course that would be self-defeating.
3. Application. On 1 August 2017 the appellant was, on his own case, unfit to perform his duties, had assaulted a colleague in public, and had resigned all his group directorships. Medical evidence required a complete break from work for approximately six months. The proposed alternative of 12 months’ notice, sick leave, an acting chief executive and an uncertain return was wholly implausible. Immediate dismissal with pay in lieu was plainly the least burdensome lawful method of termination. The bonus and benefits claims were therefore properly struck out. The challenge to the management incentive shares claim also failed, as the appellant accepted that it depended on success on the bonus and benefits issue.

Lord Justice Popplewell and Lord Justice Stuart-Smith agreed with Lord Justice Bean.

• Court of Appeal (Civil Division) [2022] EWCA Civ 901: dismissed the appeal.
• Queen’s Bench Division: Anthony Metzer QC, sitting as a deputy High Court judge, struck out the bonus and ancillary-benefits claims and gave summary judgment against the management incentive shares claim. The personal-injury ruling was not appealed.