Botham v Ministry of Defence  EWHC 646 (QB)
Judgment concerning liability in claim for breach of employment contract where the claimant had been dismissed for gross misconduct and where he had also claimed in the Employment Tribunal. Claim dismissed.
The claimant was a youth worker employed by the MoD and working at bases in Germany. Allegations of improper conduct with two young girls led to him being summarily dismissed, after disciplinary proceedings, and also to him being placed on the DFES list of people deemed unsuitable to work with children. An Employment Tribunal found that he had been unfairly dismissed and a breach of contract broadly because there was no reason to conclude that the claimant was a real risk to young people from the evidence presented to the internal proceedings and the ET. The claimant was awarded c£7k for breach of the three month notice required and c£177k reduced by 55%, capped at the statutory maximum of £53k, as compensation for loss of earnings while on the unsuitable person register. In these proceedings, the claimant was seeking the amount claimed in the unfair dismissal less the compensatory award and also for legal costs at the internal proceedings and ET.
In this judgment Slade J tackles three main issues. Firstly she considered whether the particulars of claim fell within the Johnson exclusion such that a claim for damages arising from an alleged breach of mutual trust cannot be maintained if it arises in employment. She concludes that there was no well founded cause of action as, following Eastwood and McCabe, the claim fell within the Johnson principle since all the losses claimed stemmed from dismissal and the remedy is that provided by statute in Employment Rights Act 1996. She also found that the defendant had no obligation to meet the claimant's legal costs as
"The Claimant chose to pursue claims in a jurisdiction in which no costs are awarded save in exceptional circumstances. A claim in contract cannot be used to circumvent a statutory costs regime. "
This conclusion was sufficient to dismiss the claim but she also goes on to conclude that had the cause of action been well founded, the claim would not have merged with the breach of contract claim and accordingly the claim would not have been an abuse of process.
Neutral Citation Number:  EWHC 646 (QB)
Case No: HQ09XO1654
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
THE HONOURABLE MRS JUSTICE SLADE DBE
- - - - - - - - - - - - - - - - - - - - -
** John Botham (Claimant)
- and -
The Ministry of Defence (Defendant)**
- - - - - - - - - - - - - - - - - - - - -
Frederic Reynold QC and Philip Mead (instructed by Dean Wilson Laing) for the Claimant
Wendy Outhwaite QC (instructed by Treasury Solicitor) for the Defendant
Hearing dates: 1st & 2nd December 2009
- - - - - - - - - - - - - - - - - - - - -
Mrs Justice Slade:**
1. John Botham claims damages for breach of his contract of employment with the Ministry of Defence ('MOD'). Mr Justice Walker on 4th August 2009 made an Order that the trial of the case take place in two stages: the first stage dealing with the issue of liability and the second stage dealing with the issues of causation and quantum. The hearing before me and this judgment deal with the issue of liability. As there was agreement that there were no outstanding issues of fact to be determined relating to liability Mr Justice Walker directed that witness evidence and disclosure be dispensed with. It is common ground that the parties are bound by the findings of fact in the judgments of the Employment Tribunal of 17th May 2007 on liability and 2nd November 2007 on remedy.
2. Mr Reynold Q.C. appearing with Mr Mead for the Claimant and Miss Outhwaite Q.C. appearing for the Defendant set out in their skeleton arguments the issues to be determined in deciding liability. Although the parties have adopted their own numbering phrasing and order they identify the same issues. I will consider those issues under the following headings and sequence:
First issue: do the Particulars of Claim disclose a well-founded cause of action sounding in damages which does not fall within the Johnson exclusion (Johnson v Unysis Ltd*  1 AC 518); * Second issue: has the cause of action merged with the claim for breach of contract which was the subject of a judgment in the Claimant's favour in the Employment Tribunal; Third issue: is the Claim an abuse of process in that it falls foul of the rule in Henderson v Henderson* ( 3 Hare 100).
Summary relevant facts
3. Mr Botham was employed for some fifteen years by the MoD as a youth community worker at various military bases in Germany. His employment was terminable on three months notice. It is agreed by the parties that the provisions of the MOD Personnel Manual relied upon in these proceedings which are set out in the Particulars of Claim have contractual effect. Mr Botham was suspended from work on 10th December 2002 and on 4th June 2003 charged with gross misconduct. It was alleged that he had behaved inappropriately in relation to two teenage girls, and that his behaviour in respect of young people in general gave cause for concern. The most serious allegations made against the Claimant included kissing two young girls, offering to pay one of the girls to have her tongue pierced, buying one of the girls a mobile phone without her parents' knowledge or consent and generally acting in an inappropriate manner towards young girls.
4. Following disciplinary proceedings, on 30th September 2003 Mr Botham was summarily dismissed for gross misconduct. Because his dismissal was for alleged gross misconduct in relation to young people he was placed on the list of persons deemed unsuitable to work with children kept by the Department of Education and Skills pursuant to the Protection of Children Act 1999 ('POCA').
5. Mr Botham brought a claim for unfair and wrongful dismissal. The substantive hearing of his claims was delayed for more than two years pending determination by the House of Lords in his case which was heard with others (Serco Ltd v Lawson  ICR 250) that Employment Tribunals had jurisdiction in respect of employment abroad.
6. The Employment Tribunal, in a judgment sent to the parties on 17th May 2007 ('liability judgment'), found that Mr Botham had been unfairly dismissed and that his summary dismissal was in breach of contract. The Employment Tribunal made the following findings of fact which are relied upon by the Claimant in these proceedings and which are set out in paragraph 17 of the Particulars of Claim:
i) The allegations made against the Claimant were generic not specific (para 3);
ii) There was no record of the interviews, no statements and no notes of the interview with the girls A and B in respect of whom it was alleged the Claimant had behaved inappropriately (para 16);
iii) The report of Ms McMinn, Team Manager, and the accompanying letter of Mr Wolfe, temporary Manager of the Joint Response Team, relied upon their professional opinion without placing before the Hearing Officer, Mr Blackmore, any direct evidence (para 24);
iv) The recommendation of the Hearing Officer at paragraphs 9 and 10 of his report was based on evidence which he had dismissed (para 25);
v) The Deciding Officer, Major General Moore-Bick, accepted the opinion of the temporary Manager of the Joint Response Team, Mr Wolfe, without any evidence of the investigation before him, despite having been put on notice of that fact by the Claimant's solicitor (paras 31 and 38);
vi) The allegations against the Claimant were in the most general form and changed with the passage of time (para 33);
vii) It was difficult for the Claimant to understand what the allegations were against him and to marshal his evidence in respect of those allegations (para 33);
viii) There was no attempt on the part of the Defendant to deduce (sic) vital documentary evidence of primary issues of fact on which the opinions of Ms McMinn and Mr Wolfe were based (para 33, second paragraph)
ix) The Decision of the Deciding Officer was not in accordance with the evidence and was perverse (para 38);
x) The Hearing Officer had no reasonable grounds upon which to form the conclusion that the Claimant was a real risk to young people, on the basis of the evidence presented and not presented to the Tribunal and upon a failure of the Hearing Officer to adequately investigate any of the issues of primary fact (para 38);
xi) The Deciding Officer did not have reasonable grounds to form a belief of the Claimant's guilt (para 39);
xii) Dismissal did not fall within the band of reasonable responses even if the dismissal had not been unfair for other reasons (para 40).
7. In a separate judgment dealing with remedies sent to the parties on 7th November 2007 ('remedies judgment') the Employment Tribunal awarded Mr Botham damages for wrongful dismissal in the sum of £7,136.25 based on loss of salary and benefits for the three month notice period.
8. The Tribunal made a compensatory award for unfair dismissal based on loss of earnings and benefits from the date of expiry of the three month notice period, 1st January 2004, for which damages were awarded for breach of contract, to 19th October 2007, the date of the remedies hearing. His name had been removed from the 'unsuitable person' POCA register and the Employment Tribunal held that by the date of the remedies hearing Mr Botham could have found alternative employment at a level of remuneration comparable to that which he would have received from the MoD. The Tribunal found that there should be a deduction of 55% from the compensatory and basic awards to reflect contributory fault by Mr Botham.
9. In addition to damages of £7,136.25 for breach of contract for the three months contractual notice period, the Tribunal calculated that the financial loss flowing from the unfair dismissal was £177,300. Mr Botham received a compensatory award of £53,500 assessed at £177,300.85 reduced by 55% contributory fault to £79,785.38 and capped at the statutory maximum of £53,000. He received a basic award after the 55% reduction of £1,989. Accordingly the total award made by the Employment Tribunal was £62,625.25. The MoD appealed to the Employment Appeal Tribunal. An appeal from the award of damages for breach of contract was not pursued and the appeal from the finding of unfair dismissal was dismissed on 2nd September 2008.
10. Mr Botham had legal representation in the internal disciplinary proceedings and at all stages of the litigation in the Employment Tribunal and the Employment Appeal Tribunal. He incurred legal expenses totalling £71,323 which was more than the sum awarded to him by the Employment Tribunal.
The claims made in the current proceedings
11. The Claimant claims that the Defendant was in breach of express and implied terms of his contract of employment which led to his dismissal and caused him loss of earnings and benefits extending beyond his contractual notice period. The amount claimed is that which was claimed in the unfair dismissal proceedings less the compensatory award received. Claims are also made in damages in respect of legal expenses of representation of the Claimant in the internal disciplinary proceedings and in proceedings before the Employment Tribunal and the Employment Appeal Tribunal. No claim is made for nominal damages for breach of contract. Accordingly it is not necessary for me to consider such a claim.
12. The Claimant relies on express terms of the Discipline Code which has contractual effect and which is contained in the Defendant's Personnel Manual. Annex B of the Defendant's Manual provides that it is essential that the facts are established before proceeding with disciplinary action. Chapter 2 Section 6 of the Manual requires that the charge letter must define the charge, set out the facts to support it and provide and list any documentary evidence. Further it is said that neither the record of the hearing nor the recommendations or subsequent deliberations of the deciding officer should make any reference to any unsubstantiated allegations or suspicions of other offences.
13. The Claimant also relies on an implied term:
"that the Defendant would not without reasonable cause conduct itself in a manner likely to destroy or seriously damage the relationship of confidence and trust between itself and the Claimant."
14. The Claimant relies on the findings of fact made by the Employment Tribunal set out in paragraph 6 above to allege that the Defendant committed breaches of the express and implied terms of his contract.
15. The breaches of the express terms of his contract relied upon by the Claimant are particularised in paragraph 18 of the Particulars of Claim as:
"(a) Failing to establish the relevant facts before proceeding with disciplinary action, on or after 4 June 2003;
(b) Failing sufficiently or at all to define the charge, set out the facts to support the charge, and to provide and list any documentary evidence, on or after 4 June 2003;
(c) Recommending that the Claimant be dismissed without a proper investigation of the facts which formed the basis for the recommendation, on or after 4 September 2003;
(d) Causing or permitting the Deciding Officer to make reference to other unsubstantiated allegations or suspicions of other offences."
16. Further or alternatively, the Claimant alleges that the Defendant was in breach of the implied term of his contract:
"by conducting the disciplinary process in a manifestly unfair and hostile manner such that it was likely to (and did) destroy or seriously undermine the relationship of trust and confidence between the Claimant and the Defendant."
17. The event relied upon as causing loss and damage was the Claimant's dismissal. It is alleged that the dismissal was the foreseeable result of the alleged breaches of contract. The Claimant asserts that the dismissal caused damage to his reputation. The reason for his dismissal led to his name being placed on the POCA register. His name was not removed until 27th July 2007 following the finding by the Employment Tribunal that he had been unfairly dismissed. He had been precluded from further employment in his chosen field.
18. The Claimant claims damages in respect of loss of earnings and other benefits based on sums he would have received had he continued in employment as a youth worker with the Defendant from the date of dismissal until 19th October 2007, the date by which the Employment Tribunal held that the Claimant should have obtained employment at the level equivalent to that which he had enjoyed at the date of his dismissal.
19. Damages in the sum of the legal expense of representation at the internal disciplinary and appeal hearings are also claimed as are the costs of representation at the various hearings before the Employment Tribunal and the hearing before the Employment Appeal Tribunal.
First issue: do the Particulars of Claim disclose a well founded cause of action sounding in damages which does not fall within the Johnson exclusion?
**The contentions of the parties
*20. Mr Reynold contended that the breaches of contract relied upon in these proceedings occurred prior to dismissal and constitute a free-standing cause of action. They are different from the breach asserted in the wrongful dismissal proceedings which were determined by the Employment Tribunal. The breach of contract relied upon in those proceedings was the termination of the Claimant's contract by the Defendant without notice in circumstances in which it was not entitled to do so. Accordingly the Claimant was awarded three months salary and benefits which should have been paid for the notice period. It was said that the breaches of contract by the Defendant alleged by the Claimant in these High Court proceedings occurred before the dismissal and give rise to a free-standing cause of action independent of the wrongful dismissal claim.
21. Mr Reynold contended that Johnson is not in point. That case decides that a common law claim for damages in respect of an alleged breach of the implied term of mutual trust and confidence cannot be maintained if it is founded on the fact of the termination of employment. That is the case where the breach relied upon arises from and relates to the termination of employment. In such a case the redress is confined to a claim for unfair dismissal under the statutory regime. He pointed out that in Johnson the claimant was summarily dismissed without any disciplinary process or enquiry. The breach of implied term of trust and confidence was therefore coterminous with the act of summary dismissal.
22. Mr Reynold countered the argument on behalf of the Defendant that the breaches of contract on which the claim is founded are part of the dismissal process. He contended that the breaches relied upon by the Claimant in this case are, in the main, discrete breaches of express terms of the contract occurring on different dates. The breaches are not a continuing breach of the implied term of trust and confidence term culminating in dismissal stated by Lord Nicholls in Eastwood v Magnox Electric plc; McCabe v Cornwall County Council  ICR 1064 to fall within the Johnson exclusion.
23. Mr Reynold relied on the dictum of Lord Nicholls at paragraph 27 that:
"If before his dismissal, whether actual or constructive, an employee has acquired a cause of action at law, for breach of contract or otherwise, that cause of action remains unimpaired by his subsequent unfair dismissal and the statutory rights flowing therefrom. By definition, in law such a cause of action exists independently of the dismissal."
24. Mr Reynold also relied on the reference by Lord Steyn at paragraph 39 to the demarcation disputes which would arise following Johnson in which he observed that the difference in treatment of causes of action acquired before and on dismissal:
"…will often give rise to questions whether earlier events do or do not form part of the dismissal process. After all, such problems in relationships between an employer and an employee will often arise because of a continuing course of conduct. In practice this will inevitably lead to curious distinctions and artificial results. It will involve case by case decision-making rather than principled adjudication.
…the way in which a rule or principle operates in the real world is one of the surest tests of its soundness."
25. Mr Reynold contended that but for the breaches of contract in respect of disciplinary proceedings there would not have been findings of gross misconduct against the Claimant, he would not have been dismissed and his name would not have been included on the POCA register. He relied on the judgment of Lady Smith in King v University of St. Andrews  IRLR 252 which was referred to with approval by Lord Steyn in Eastwood and McCabe. Lady Smith held that the implied term of trust and confidence applied to the conduct of disciplinary proceedings. At paragraph 21 she regarded it as illogical that such a duty :
"…be regarded as suspended whilst the employer carries out the critically important task of assessing whether good cause for dismissal has been shown. For an employer to act in breach of that duty during an assessment which has the potential either to reinforce or to terminate the contract of employment would clearly be highly destructive of and damaging to the relationship between them."
26. On behalf of the Claimant it was submitted that in determining whether a claim falls within the Johnson exclusion it is relevant to determine whether the cause of action is independent of the termination of employment not whether the resultant loss arises from such termination.
27. Mr Reynold submitted that the Claimant was entitled to seek damages for breach of contract in respect of losses sustained after the expiry of the three month contractual notice period for which he was awarded damages by the Employment Tribunal in his wrongful dismissal claim. It was contended that the justification for such an award was not just the stigma attaching to dismissal for inappropriate behaviour towards young girls but also the absolute bar on his ability to work in his chosen profession because of his inclusion on the POCA register as a result of his dismissal for that reason.
28. Mr Reynold relied on Malik v BCCI  ICR 606 in which the House of Lords held that if it was reasonably foreseeable that in consequence of the employer's implied obligation an employee's future employment prospects would be hampered, damages could be recovered for any continuing loss sustained.
29. It was contended by Mr Reynold that it was reasonably foreseeable that breach of the implied term of trust and confidence and breach of express terms by the Defendant in the conduct of disciplinary proceedings could lead to an unjustified decision to dismiss the Claimant for alleged gross misconduct in his dealings with teenage girls which in turn would lead to his name being included on the POCA register. Inclusion on the register would preclude the Claimant from pursuing his chosen occupation. Accordingly the Claimant was entitled to recover damages for breach of contract extending beyond the notice period.
30. The Employment Tribunal found that the conduct which the Claimant had admitted was in breach of the Code of Conduct and Professional Guidelines for Youth and Community Staff and displayed poor judgment. It merited a reduction of 55% in the awards for unfair dismissal because of contributory fault. He had not consulted with the parents of the teenage girl to whom his sister had lent a mobile phone which he had bought and he had permitted young persons to help him with house cleaning at weekends.
31. The Employment Tribunal found that the Claimant's actions could have been dealt with by an appropriate warning. Mr Reynold contended that the enduring stigma which was attached to the allegations for which he was unfairly dismissed would not attach to the behaviour for which he could have been warned.
32. Mr Reynold submitted that damages for the breaches of contract relied upon by the Claimant could also include the expense of obtaining legal representation at disciplinary hearings and proceedings before the Employment Tribunal and EAT. He relied on Berry v British Transport Commission  1 WLR 450 in which the Court of Appeal held that costs of defending criminal proceedings were recoverable in an action for malicious prosecution. He also referred to Union Discount Co Ltd v Zoller  1 WLR 1518 in which the Court of Appeal awarded a successful party damages reflecting the costs incurred in litigating at the instance of the defendant in a jurisdiction which the defendant chose in breach of an exclusive jurisdiction clause.
33. Further, Mr Reynold relied upon Governors of X School v R (on the application of G and (1) Y City Council (2) Secretary of State for Children & Schools & Families (Interveners) & Equality & Human Rights Commission (Interested Party) (2010)  EWCA Civ 1 to submit that Article 6 of the European Convention on Human Rights may be relied upon to support an argument that it was appropriate or even necessary for an individual to be given legal representation in internal disciplinary proceedings which would have a substantial influence on his right to carry out his chosen occupation.
34. Even if the outcome of the disciplinary proceedings against the Claimant had not resulted in dismissal, it was submitted by Mr Reynold that the allegedly wrongful institution and conduct of disciplinary proceedings founded free-standing causes of action as in Eastwood and McCabe. Those breaches caused the Claimant loss in incurring legal expenses.
35. Miss Outhwaite Q.C. for the Defendant contended that the Claimant's High Court claim is for damages arising out of the manner of his dismissal and falls within the Johnson exclusion. There is nothing unusual about the Claimant's claims. They are common complaints against employers. Miss Outhwaite contended that Eastwood and McCabe were exceptional cases. The loss claimed was the result of psychiatric injury and not the dismissals and was caused by breaches of contract occurring before dismissal. The causes of action in their cases arose before and independently of their dismissals. Amongst other passages in Johnson Miss Outhwaite relied on paragraph 66 in which Lord Hoffman considered that by requiring employers to give employees a statement of applicable disciplinary procedures in the statutory written Particulars of Employment, Parliament cannot have intended that such provisions should give rise to independently actionable contractual duties. Nor did he believe that Parliament intended that such rules should give rise to a common law action in damages by which the limit on compensation for unfair dismissal could be circumvented.
36. Miss Outhwaite also relied upon the application by Lord Nicholls in Eastwood and McCabe of the Johnson boundary line. At paragraph 28 he held:
"In the ordinary course, suspension apart, an employer's failure to act fairly in the steps leading to dismissal does not of itself cause the employee financial loss. The loss arises when the employee is dismissed and it arises by reason of the dismissal. The resultant claim falls squarely within the Johnson exclusion area."
37. Miss Outhwaite contended that the claims in this case are distinguishable from those in Eastwood and McCabe. She submitted that Eastwood does not apply in the present case. The Claimant's High Court action does not arise from antecedent breaches of contract preceding the termination of the contract of employment because:
i) As a matter of fact and common sense, all allegations of breach of contract are part of the dismissal process. The dismissal process is one indivisible event;
ii) The allegations of breach of contract are subject to finding of fact by the Employment Tribunal in determining the Claimant's claims for unfair dismissal and breach of contract. Such findings of fact would have been unnecessary unless they formed part of the dismissal process.
iii) The heads of loss claimed by way of damages are losses consequent only on the termination of the contract of dismissal: the relief claimed arises out of dismissal. Without the dismissal the Claimant did not experience the loss he has pleaded. In particular, absent the dismissal, he suffered no loss: there was no other financial loss and no personal injury.
38. It was pointed out by Miss Outhwaite that, save for legal costs, the claim for damages pleaded in these High Court proceedings is for exactly the same loss of earnings and other benefits as were claimed in the Schedule of compensation in the proceedings before the Employment Tribunal. This clearly demonstrates that the claim in these proceedings is for loss caused by dismissal and not by any antecedent breach of contract giving rise to an independent cause of action.
39. If, contrary to the Defendant's submission, a common law cause of action had accrued prior to the dismissal, Miss Outhwaite contended that it would involve a breach of contract not causative of loss or damage but would only attract nominal damages. That is not the claim which had been pleaded.
40. Whilst in exceptional cases the court may award stigma damages, Miss Outhwaite contended that this is not such a case. The Claimant had the benefit of a finding of unfair dismissal which deals satisfactorily with any suggestion of stigma. Further in finding contributory fault of 55% in making the unfair dismissal award, the Employment Tribunal considered that the Claimant was considerably to blame for his dismissal. Accordingly any stigma which arose from his dismissal arose principally from his own behaviour. Further, Miss Outhwaite contended that the Claimant's inclusion on the POCA list for a limited period did not exclude him from working with children in Germany. The Claimant had not submitted any evidence in respect of damages for loss of reputation.
41. As for the claim for damages in respect of costs, the Defendant contended that the Claimant made an application for costs to the Employment Tribunal which was dismissed. There was no appeal from that decision. The general rule is that no costs are awarded by the Employment Tribunal or the Employment Appeal Tribunal. Further Miss Outhwaite contended the claim for costs is an abuse of process in the light of the decision on costs in the Employment Tribunal and the absence of any application for costs in the Employment Appeal Tribunal. The costs regime cannot be circumvented by a claim for damages in the High Court.
42. Miss Outhwaite pointed out that the costs claimed flow from the dismissal and subsequent litigation. She contended that if the Claimant is correct that his claims for breach of contract which are the subject of proceedings before the High Court do not flow from the dismissal and so are not within the Johnson exclusion then he would not be able to claim the litigation costs arising from the dismissal process and the hearings before the Employment Tribunal and the Employment Appeal Tribunal.
43. Johnson is frequently cited as authority for the proposition in the speech of Lord Nicholls at page 526C that:
"…a common law right embracing the manner in which an employee is dismissed cannot satisfactorily coexist with the statutory right not to be unfairly dismissed."
44. The case advanced by Mr Johnson was set out by Lord Steyn and was based on alleged breaches of the implied term of trust and confidence in that his employer failed:
"(i) to put allegations to the [employee]; (ii) to accord the [employee] an opportunity to defend himself; (iii) to provide a full explanation of allegations against the [employee]; (iv) to comply with the [employers'] disciplinary procedures and the rules of natural justice …" (p.529 paragraph 11)
It was alleged that the breaches caused Mr Johnson to suffer a mental breakdown which in turn caused inability to find employment. Lord Steyn noted that his claim was solely for special damages for financial loss arising from his inability to find employment.
45. Lord Hoffman summarised at page 538 paragraph 32 the breaches of contract alleged by Mr Johnson as lying:
"…in the fact that he was dismissed without a fair hearing and in breach of the company's disciplinary procedure."
At paragraph 46 he pointed out that the implied term of trust and confidence is concerned with preserving the continuing relationship between employer and employee and does not seem entirely appropriate for use in connection with the way in which the relationship is terminated.
46. Referring to the statutory remedy of unfair dismissal, Lord Hoffman held at paragraph 58 that it would be contrary to the evident intention of Parliament that there should be a contractual common law remedy for unfair circumstances attending dismissal. It appears that Lord Hoffman did not attach significance to whether disciplinary procedures were expressly incorporated into the contract of employment or whether a claimant was relying on an implied term to assert a breach of contract in failing to apply fair disciplinary procedures. He posed the question whether the disciplinary procedures constituted express terms of the contract of employment and observed that perhaps for some purposes they did. He held at paragraph 63:
"But the employee handbook has to be construed against the relevant background and the background which fairly looms over the disciplinary procedure is part X of the 1996 Act. The whole disciplinary procedure is designed to ensure that an employee is not unfairly dismissed. So the question is whether the provisions about disciplinary procedure which (to use a neutral phrase) applied to Mr Johnson's employment were intended to operate within the scope of the law of unfair dismissal or whether they were intended also to be actionable at common law, giving rise to claims for damages in the ordinary courts."
47. Given the background to disciplinary procedures, at paragraph 66 Lord Hoffman found it
"…impossible to believe that Parliament, when it provided in section 3(1) of the 1996 Act that the statement of particulars of employment was to contain a note of any applicable disciplinary rules, or the parties themselves, intended the inclusion of those rules should give rise to a common law action in damages which would create the means of circumventing the restrictions which Parliament had imposed on compensation for unfair dismissal.
…But I do not think that they can have been intended to qualify the employer's common law power to dismiss without cause on giving such notice, or to create contractual duties which are independently actionable."
Lord Hoffman concluded that disciplinary procedures could not have been intended to create contractual duties which are independently actionable.
48. Lord Bingham and Lord Millett agreed with the opinion of Lord Hoffman. Whilst acknowledging that in principle the employee's argument had much to commend it, Lord Nicholls, in dismissing the appeal, held that 'there is an insuperable obstacle: the intervention of Parliament in the unfair dismissal legislation.' Lord Steyn considered that the Claimant had a reasonable cause of action but dismissed the appeal on other grounds.
49. In King Lady Smith in the Court of Session considered whether Johnson precluded an actionable implied term of trust and confidence applying to the employer's investigation and evaluation of whether there was good cause to dismiss Mr King. In his case the employers were required to show good cause before dismissing with due notice. Lady Smith held that on the facts of that case Mr King was entitled to rely on the implied duty of trust and confidence subsisting whilst the investigation procedures into his conduct were being carried out. Accordingly she held that he could pursue his claim for damages for breach of such a term during the stage of investigation and evaluation.
50. In Eastwood and McCabe at paragraph 39 Lord Steyn approved the lucid analysis of Lady Smith in King of whether before dismissal 'an employee has acquired a cause of action at law, for breach of contract or otherwise'. He considered that whether or not cases fell within the Johnson exclusion would often:
"…give rise to questions whether earlier events do or do not form part of the dismissal process."
He recognised that this '…will involve case by case decision-making rather than principled adjudication.'
51. The breach of contract relied upon by the claimants in Eastwood and McCabe was that of the implied term of trust and confidence. In the first case the claimants asserted that the breach was constituted by a campaign to demoralise them before dismissing them. Damages were claimed for stress-related illness and inability to work alleged to have been caused by the campaign. In the second case Mr McCabe claimed damages for psychiatric injury caused by failure to investigate allegations against him and to conduct disciplinary proceedings properly. In the first case, unfair dismissal claims were compromised. The terms of the compromise agreement reserved the men's right to pursue a claim at common law for personal injuries arising out of their employment. In the second case Mr McCabe succeeded in his claim for unfair dismissal and received a maximum compensatory award.
52. In both cases the House of Lords held that where an employee had, prior to his unfair dismissal, acquired a common law cause of action against his employer in respect of the employer's failure to act fairly towards him before his dismissal such that the cause of action could be said to exist independently of his subsequent dismissal and financial loss had flowed directly from that failure, the employee could, subject to the rule against double recovery, bring an action at law in respect of that loss. In the cases of all three men the House of Lords held that the assumed facts constituted causes of action which accrued before the dismissals. They disclosed reasonable causes of action which should proceed to trial.
53. In Eastwood and McCabe Lord Nicholls held:
"28. In the ordinary course, suspension apart, an employer's failure to act fairly in the steps leading to dismissal does not of itself cause the employee financial loss. The loss arises when the employee is dismissed and it arises by reason of his dismissal. Then the resultant claim for loss falls squarely within the Johnson exclusion area.
- Exceptionally this is not so. Exceptionally, financial loss may flow directly from the employer's failure to act fairly when taking steps leading to dismissal. Financial loss flowing from suspension is an instance. Another instance is cases such as those now before the House, when an employee suffers financial loss from psychiatric or other illness caused by his pre-dismissal unfair treatment. In such cases the employee has a common law cause of action which precedes and is independent of, his subsequent dismissal."
54. Lord Nicholls distinguished between claims which fell outside and inside the Johnson exclusion area by reference to whether the loss claimed flowed directly from breaches of contract before dismissal or from the dismissal which resulted from the breaches. The question of whether loss results directly from breaches before dismissal or from the resultant dismissal thus determines whether a particular breach falls within or without the Johnson exclusion area. In paragraph 28 Lord Nicholls posited breaches of the implied term of trust and confidence in the steps leading to dismissal which do not themselves cause financial loss. In such cases because loss arises from the resultant dismissal and not directly from the prior breaches of contract the claim for loss falls within the Johnson exclusion area.
55. At paragraph 31 Lord Nicholls held:
"Second, the existence of this boundary line means that in some cases a continuing course of conduct, typically a disciplinary process followed by dismissal, may have to be chopped artificially into separate pieces. In cases of constructive dismissal a distinction will have to be drawn between loss flowing from antecedent breaches of the trust and confidence term and loss flowing from the employee's acceptance of these breaches as a repudiation of the contract. The loss flowing from the impugned conduct taking place before actual or constructive dismissal lies outside the Johnson exclusion area, the loss flowing from the dismissal itself is within that area."
56. Lord Hoffman, Lord Rodger and Lord Brown agreed with the speech of Lord Nicholls.
57. As is clear from paragraph 20 of the Particulars of Claim, all the breaches of express and implied contractual terms relied upon by the Claimant in these High Court proceedings were alleged to have resulted in his dismissal. The damages claimed are consequential on his dismissal. Although a minor matter, it is to be noted that no exception in this regard is made in the Particulars of Claim for expenses incurred in obtaining legal representation for the internal disciplinary proceedings.
58. Although a breach of contract could be established without showing loss, such a claim is not made in this case. This is understandable as it would only result in an award of nominal damages. Save for the expense of legal representation in internal disciplinary proceedings, the claim for damages in this case is based on the loss which resulted from the Claimant's dismissal.
59. The decision as to whether a claim falls within or without the Johnson exclusion is fact specific. The fact that the claim for loss of earnings and benefits in the High Court relies on the same Schedule as formed the basis for the award by the Employment Tribunal of compensation for unfair dismissal demonstrates that the damages claimed in these proceedings arise from the dismissal. Prior breaches of contract did not give rise to any claim for damages in these proceedings in respect of loss of earnings.
60. The overlap in the damages claimed for breach of contract and the compensation claimed for unfair dismissal shows that the loss claimed arose when the Claimant was dismissed and by reason of his dismissal. Applying the approach of Lord Nicholls in paragraph 28 of the judgment in Eastwood and McCabe the resultant claim falls squarely within the Johnson exclusion area.
61. This is not an exceptional case. The breaches of contract in the steps leading to dismissal are alleged to have led to unfair dismissal for conduct which precluded the Claimant from working in his chosen field.
62. It is not uncommon for disciplinary procedures to be incorporated into contracts of employment and therefore to have contractual effect. These are likely to cover the various steps, investigation and stages in the decision taking process which may lead to dismissal and in respect of which the Claimant alleges breaches. It is not unusual for claimants in unfair dismissal proceedings to complain of breaches of contractual disciplinary procedures or of failure to act fairly in deciding to dismiss which would be likely to amount to a breach of the implied term of trust and confidence.
63. Unfortunately unfair dismissal for alleged misconduct which is shown to have been in breach of contractual or fair disciplinary procedures is not uncommon. Such dismissals can have long term effects on the ability of the employee to obtain other employment. An employee unfairly dismissed for alleged fraud is likely to have his future employment prospects damaged. So too is the employee unfairly dismissed for gross incompetence.
64. The remedy for dismissal which wrongly occurred as a result of breach of disciplinary procedures is provided by statute in the unfair dismissal provisions of the Employment Rights Act 1996.
65. Applying the approach of Lord Nicholls in Eastwood and McCabe with whose opinion the majority of their Lordships agreed, in my judgment the claim for damages in this case in respect of loss of earnings and benefits, falls within the Johnson exclusion. Whether the label 'stigma damages' is to be attached to such a claim is immaterial to that conclusion.
66. As appears from paragraph 20 of the Particulars of Claim, all loss and damage is alleged to have resulted from dismissal. Notwithstanding that this would exclude the claim for the expense of legal representation at internal disciplinary hearings this claim will be considered.
67. The Claimant had the benefit of legal assistance for the purpose of the internal disciplinary proceedings. Mr Reynold relied on the judgment of the Court of Appeal in The Governors of X School v R to support such a claim. The Court of Appeal held that an employee whose right to practice his profession may be at stake in such disciplinary proceedings had a right under Article 6 to be afforded the opportunity to arrange for legal representation at those proceedings. However that decision does not oblige an employer to pay for such legal representation.
68. In considering the conduct of the Claimant the Employment Tribunal held in paragraph 6 of the remedies judgment that it:
"…was satisfied that the conduct as admitted was culpable and blameworthy and was the sole reason for the disciplinary procedure and did contribute to his dismissal."
Thus on the findings of fact, the incurring of legal expenses for representation in internal disciplinary proceedings did not result from any breach of contract by the Defendant.
69. In my judgment there is no basis for the claim that the Defendant pay damages in respect of legal representation of the Claimant at the internal disciplinary proceedings. The Claimant chose to have his solicitor present. The Defendant has no obligation to meet the legal costs incurred.
70. Mr Reynold contended that but for the breaches of contract asserted in these proceedings the costs of legal representation in the Employment Tribunal and the Employment Appeal Tribunal would not have been incurred. But for the breaches of contract the proceedings would never have taken place. With respect to Mr Reynold this submission clearly demonstrates that the current claim in the High Court is for damages arising from the Claimant's dismissal.
71. The claim for damages in respect of the cost of legal representation for the proceedings before the Employment Tribunal and the Employment Appeal Tribunal clearly arises from the dismissal of the Claimant. Unless there had been a dismissal the Claimant could not have pursued a claim for unfair dismissal. Without a termination of employment he could not have pursued his claim for breach of contract before the Employment Tribunal. Costs of legal representation in the Employment Tribunal and the Employment Appeal Tribunal were incurred because the Claimant was dismissed. A claim in respect of those costs therefore falls within the Johnson exclusion for the reasons that the claim in respect of loss of earnings and benefits is not well founded.
72. The Claimant chose to pursue claims in a jurisdiction in which no costs are awarded save in exceptional circumstances. A claim in contract cannot be used to circumvent a statutory costs regime.
73. The Particulars of Claim do not disclose a well founded cause of action. This conclusion leads to the dismissal of the claim however I will briefly consider the remaining issues.
Second issue: have the causes of action merged with the claim for breach of contract which was the subject of a judgment in the Claimant's favour in the Employment Tribunal
*74. Mr Reynold and Miss Outhwaite agreed that merger of a cause of action prevents a claimant from claiming again on the same cause of action: the claimant's cause of action is subsumed in the judgment he has obtained.
75. Mr Reynold contended that the breaches of contract upon which the Claimant relies in these proceedings are not the same as the breach of contract claim before the Employment Tribunal. The claim before the Employment Tribunal was for wrongful dismissal: failure to give notice or pay in lieu.
76. The issue for the Tribunal in determining the claim for damages in respect of the notice period was whether the Claimant had been guilty of gross misconduct entitling the Defendant to dismiss him without notice. The Employment Tribunal decided that he had. It held that:
"The Respondent was in breach of contract having failed to give the Claimant the appropriate notice or make a payment in lieu."
Damages were awarded on the basis of three months loss of pay and financial benefits.
77. Mr Reynold contended that in these proceedings the Claimant relies on breaches of contract by the Defendant prior to the dismissal which are of a wholly different nature from the breach of contract claim before the Employment Tribunal. He distinguished Fraser v HMLD Ltd  ICR 1395. In that case the claimant sought to recover in High Court proceedings the excess over the statutory cap on damages for his wrongful dismissal claim which he had been awarded in the Employment Tribunal. In Fraser the claim was the same in both sets of proceedings, breach of contract in failing to give contractual notice. Mr Reynold contended that the claim in these proceedings is for breach of contract before termination of employment whereas the claim determined by the Employment Tribunal was for breach of contract in failing to give notice.
78. Miss Outhwaite relied on the definition of cause of action by Lord Goff in Republic of India v India Steamship Co Ltd The Indian Endurance  AC 410 at 421 E-F:
"'a cause of action' consists of the minimum facts which a plaintiff is required in law to plead and (if traversed) prove in order to obtain the relief which he claims."
to contend that the claim for breach of contract in these High Court proceedings is the same as that which had been determined in the Employment Tribunal.
79. Miss Outhwaite submitted that the contractual claims before both the High Court and the Employment Tribunal turn on the same breaches of contract and the same facts. These are set out in paragraph 18 of the Particulars of Claim and were the subject of findings of fact by the Employment Tribunal. Miss Outhwaite contended that the Schedule attached to the judgment of the Employment Tribunal on remedy shows that damages awarded for breach of contract were not limited to loss in respect of the three month notice period.
80. It was contended on behalf of the Defendant that the Claimant could have protected his right to pursue contractual claims by not making a claim for breach of contract in the Employment Tribunal. Miss Outhwaite draws attention to the frank admission by the Claimant's solicitor in paragraph 6 of his witness statement of 7th July 2009 that the possibility of a breach of contract claim in the High Court did not occur to him. First, the Claimant would not have been in a position to fund such an action and incur the risk of having to pay the Defendant's costs if unsuccessful. Secondly he said that the strength of the Claimant's case in contract over and above wrongful dismissal only became apparent after the evidence had emerged before the Employment Tribunal.
81. The breach of contract alleged by the Claimant in these High Court proceedings is breach of a contractual disciplinary procedure in steps taken by the Defendant before dismissal. The damages claimed are in respect of loss which extends well beyond the contractual notice period.
82. The breach of contract claim before the Employment Tribunal was set out in the Application to the Tribunal at paragraph 16:
"A further claims three months' pay for wrongful dismissal. The MOD have justified their failure to give three months' notice on the basis that this was gross misconduct. The grounds upon which the dismissal was eventually based do not amount to gross misconduct."
83. The breaches of contract alleged in these High Court proceedings are set out in paragraph 18 of the Particulars of Claim and occurred before dismissal.
84. Miss Outhwaite submitted that reliance by the Claimant on the same facts and the same loss as was found by the Employment Tribunal demonstrates that the same claim is brought in these proceedings as was brought in the contract claim before the Employment Tribunal.
85. The findings of fact relied upon in these proceedings before the High Court are those reached by the Employment Tribunal in its determination of the unfair dismissal claim not the claim for breach of contract. So too the Schedule of damages relates to compensation for unfair dismissal not damages for breach of contract for failure to give three months contractual notice. Damages of £7,136.25 were shown separately in the judgment of the Employment Tribunal on remedy.
86. In my judgment the claim before the High Court raises a different cause of action from the contractual claim before the Employment Tribunal. The current claim is in respect of loss of earnings after the expiry of the contractual notice period and asserts breaches of contract before termination of employment. The contract claim before the Employment Tribunal was for damages in respect of the contractual notice period relying on breach of contract by terminating the contract without notice. If the Particulars of Claim had disclosed a well founded cause of action sounding in damages such an action would not have merged with the breach of contract claim determined by the Employment Tribunal.
Third issue: is the Claim an abuse of process in that it falls foul of the rule in Henderson v Henderson ( 3 Hare 100)
87. Mr Reynold pointed out that the modern approach to the rule in Henderson v Henderson (1843) 3 Hare 100 is set out in the speech of Lord Bingham in Johnson v Gore Wood & Co  2 AC 1. Lord Bingham held at page 31 C-D:
"It is … wrong to hold that because a matter could have been raised in the earlier proceedings it should have been, so as to render the raising of it in later proceedings necessarily abusive. That is to adopt too dogmatic an approach to what should in my opinion be a broad merits-based judgment which takes account of the public and private interests involved, and takes into account all the facts of the case, focusing on the crucial question whether in all the circumstances a party is misusing or abusing the process of the court by seeking to raise before it the issue which could have been raised before."
88. In the light of the guidance in Johnson v Gore Wood Mr Reynold contended that these High Court proceedings are not an abuse of process. There was no such abuse in the Claimant failing to bring all his breach of contract claims together in a single High Court action instead of first pursuing wrongful and unfair dismissal claims in the Employment Tribunal. Mr Reynold contended that on grounds of speed and cost it was not abusive for the Claimant to have brought proceedings for wrongful dismissal in the Employment Tribunal and then to pursue a separate claim for breach of contract in the High Court.
89. Mr Reynold recognised the importance of the principle of finality in litigation. He pointed out that the present action would not involve the re-hearing of evidence. The case would proceed on the facts determined by the Employment Tribunal and admitted breaches of contract.
90. Miss Outhwaite rightly recognised that the Claimant would always have had to bring his unfair dismissal proceedings in the Employment Tribunal. However she contended that all his contractual claims should have been brought together in the High Court. Those were:
(i) the wrongful dismissal claim which was brought before the Employment Tribunal;
(ii) the breach of contract claim being pursued in these proceedings; and
(iii) the contractual claim for expenses issued in the Bournemouth County Court.
This judgment is not concerned with the proceedings issued in the Bournemouth County Court.
91. The Defendant acknowledged that even if the Claimant had breached the rule in Henderson v Henderson by issuing these proceedings the Court may nevertheless permit him to bring the claim although it may arise out of the same facts as the claim before the Employment Tribunal. However Miss Outhwaite contended that there are no exceptional circumstances in this case which justify the Claimant not having brought the entirety of his claim before the High Court.
92. Miss Outhwaite submitted that the Claimant cannot take the benefit of the Employment Tribunal process and then seek to circumvent its disbenefits by bringing a further contractual claim in the High Court based on success before the Employment Tribunal.
93. If the Claimant had adopted the course which the Defendant contended would not have amounted to an abuse of process and, as occurred, the Claimant had succeeded in his unfair dismissal claim there would have been a claim in the High Court in any event. This course of action would not have furthered the principle discussed in Henderson v Henderson and Johnson v Gore Wood of bringing forward together all matters which raise the same subject of litigation.
94. A stay on proceedings in the Employment Tribunal pending the outcome of these proceedings and wrongful dismissal proceedings had they been brought in the High Court would have led to delay and would not have been determinative of the unfair dismissal proceedings. If the Claimant had been successful in these proceedings no compensation for unfair dismissal may have been awarded. However the Claimant may still have sought a finding of unfair dismissal and a basic award.
95. It was rightly not suggested by the Defendant that the Claimant should have brought his current High Court claim in the Employment Tribunal. By reason of the Employment Tribunals Extension of Jurisdiction (England and Wales) Order 1994 he would have been limited to the statutory limit of £25,000 damages for all his contractual claims. The Claimant could not have claimed the balance in High Court proceedings as he would have been met by the argument that the two claims had merged as in Fraser v HLMAD.
96. If, contrary to my finding, the Particulars of Claim were to disclose a well founded cause of action for damages, in my judgment it would not be an abuse of process to bring it forward in these proceedings.
97. The Particulars of Claim do not disclose a well founded cause of action sounding in damages which does not fall within the Johnson exclusion. Accordingly the Claim is dismissed.
Published: 01/04/2010 16:23