Clause and Effect: An Expert Review
of Developments in EmploymentRelated Contract Law
Aidan O’Neill QC
Introductory Remarks
Incorporated Terms: Collective
Agreements and Management
Policies
Thomas Linden QC
Mutual Trust and Confidence
Andrew Smith
Topics
A. Buckland v Bournemouth – Back to
Basics?
B. Distinguishing Malik – Tullett Prebon
and the Question of Motive
C. The ‘Anterior Breach’ Doctrine – A
Conflict of Judicial Views
D. Case Law Round-Up
Buckland v Bournemouth
• University professor aggrieved at
decision to re-grade his students’ marks
• Not satisfied with the internal inquiry
• Brought a claim of constructive unfair
dismissal
• CA upheld ET’s finding of UD
• Endorsed EAT’s reasoning in respect of
constructive dismissal claims based on
alleged breach(es) of the MTC implied
term
(1) In determining whether or not R is in fundamental
breach of the implied term of MTC, the
“unvarnished” Malik test should be applied
(2) If, applying the principles in Western Excavating v
Sharp, acceptance of that breach has entitled the E
to leave, he has been CD
(3) It is open to R to show that such dismissal was for a
potentially fair reason
(4) If step 3 is satisfied, it will be for the ET to decide
whether dismissal for that reason, both substantially
and procedurally, fell within the range of reasonable
responses and was fair
Range of reasonable responses test only arises for
determination at the final stage of the process
• Any problems...?
• Formulation of Malik term  defence for
R if it can show “reasonable and proper
cause” for its conduct
• Some assessment of reasonableness at
‘stage 1’ is inevitbale
• EAT (Underhill P) in Burton, McEvoy &
Webb v Curry [2010] - practical realities
• Distinction with / without a difference?
• Nagi v Sheffield Black Drugs Service
[2010]
• Q. Can a repudiatory breach of contract
be unilaterally ‘cured’ or remedied?
• A. No
• But: a “reasonably robust approach to
affirmation” is permissible (per Sedley
LJ)
• Jacob LJ more cautious: it takes “rather
a lot” to substantiate a finding of
affirmation / waiver
• Recognised the “enormous pressure”
faced by Es in circumstances such as
Mr Buckland’s
Tullett Prebon: R’s Motive
• CA emphasised contractual test of
repudiation – does the defaulting party
evince an “intention to abandon and
altogether refuse to perform the
contract”?
• It is legitimate to take into account
motive in certain circumstances
• Decision in Malik (per Lord Steyn)
distinguished by CA – circumstances of
that case were “manifestly different”
• Malik was not concerned with the
“specific dynamics between employer
and employees”
• Tullett’s conduct was intended to
strengthen, not attack, the relationship
of trust and confidence
• Tactical deployment of CD claims –
close scrutiny of senior Es seeking to
avoid notice periods and “irksome
covenants”
• Duties of trust and confidence may arise
prior to the commencement of an
employment relationship
• E.g.
“forward
contract”
prospective employer
with
a
• Potentially absurd results if not the case
‘Anterior Breach’ Debate
• Is Party A, who has committed a
repudiatory breach of contract (but
which has not been accepted by Party
B), barred from terminating the contract
by reason of a subsequent repudiatory
breach by Party B (which would
otherwise entitle Party A to terminate
the contract)?
• Jack J (Tullett Prebon v BGC and
Brandeaux Advisers v Chadwick)
vs
• Lady Smith (Aberdeen City Council v
McNeill)
Case Law Round-Up
• Watson v University of Strathclyde
[2011] – importance of perceived bias in
an internal appeal process
• Nixon v Coates [2010] – R’s failure to
deal with E’s grievance in a proper
fashion
• Bedford v Pilgrims Group Ltd [2010] –
failure to pay holiday pay was not a
fundamental breach of contract
• Bailey v Alexander House Agenceis Ltd
[2011] - R’s failure to contact E about
her grievance (at all), when absent on
sick leave, was a breach of MTC
• Sawar v SKF (UK) Ltd [2010] – public
admonishment of senior E was not a
breach of MTC
• NB. tricky dividing line between (i)
relevant “context” of the alleged
repudiatory conduct; and (ii) subsequent
attempts to “cure” a fundamental breach
Unilateral Variation Clauses
Mathew Purchase
General principles: variations
A variation of terms requires consent
Ways around this:
•
Imposition and acquiescence
•
Dismissal and re-engagement
•
Unilateral variation clauses
General rules: UVCs
Must be express
Must be clear and unambiguous
The more ‘unreasonable’ the clause, the
more clear it must be
Land Securities Trillium v Thornley
‘You will perform to the best of your ability all
the duties of the post and any other post you
may subsequently hold and any other duties
that may reasonably be required of you and
will at all times obey reasonable instructions
given to you.’
Cadoux v Central Regional Council
Terms are ‘supplemented by the Authorities’
Rules as amended from time to time’
‘Central regional Council has introduced a noncontributory life assurance scheme for all
members of staff’
Bateman v Asda Stores
‘The company reserves the right to review, revise,
amend or replace the content of this handbook,
and introduce new policies from time to time to
reflect the changing needs of the business and to
comply with new legislation…’
Other arguments
Restrictive interpretation?
Wandsworth London Borough Council v D’Silva
‘the court is unlikely to favour an interpretation
which does more than enable a party to vary
contractual provisions with which that party is
required to comply’
Implied terms
Exercise must be in good faith, and not arbitrary,
capricious or irrational
Exercise must comply with the implied term of
mutual trust and confidence
Sham agreement
Autoclenz v Bateman
‘where there is a dispute as to the genuineness of a written
term in a contract, the focus of the enquiry must be to
discover the actual legal obligations of the parties. To carry
out that exercise, the focus will have to examine all the
relevant evidence. That will, of course, include their written
terms itself, read in the context of the whole agreement. It
will also include evidence of how the parties conducted
themselves in practice and what their expectations of each
other were.’
Requirement to notify the employee
(1) Scally v Southern Health and Social Services Board
(2) Interfoto Picture Library v Stiletto Visual Programmes
‘If a condition in a set of printed conditions is
particularly onerous or unusual, the party seeking
to enforce it must show that that particular
condition was brought to the attention of the other
party’
Contractual Disciplinary Procedures
Laura McNair-Wilson
Can a breach of a contractual disciplinary policy
lead to career loss damages?
• Established orthodoxy was that it could not.
• The employee is only entitled to damages for
loss of earnings during the period that would
have been required for proper completion of
the disciplinary procedure plus the notice
period.
• Gunton v Richmond Upon Thames [1980]
ICR 755
Johnson v Unisys Ltd. [2001]
UKHL 13
Facts:
• Mr. Johnson was summarily dismissed for
misconduct.
• ET found his dismissal unfair because his employer
did not comply with its disciplinary procedure.
• Mr. Johnson suffered a mental breakdown which
impaired his ability to secure alternative employment.
• He alleged that the manner of his dismissal was in
breach of implied term of trust and confidence and
sought damages for the loss he had suffered.
The House of Lords held:
• The implied duty of trust and confidence did not
extend to dismissal or the manner in which
employment was terminated.
• Where Parliament has legislated there is no
room for the court to invent, as a matter of
common law, a further remedy or protection
(particularly one which might be more generous
than the statutory code).
Eastwood v Magnox Electric Plc; McCabe v
Cornwall County Council [2004] IRLR 733
• The House of Lords clarified the ambit of the
“Johnson-exclusion zone”;
• There is a demarcation between events
leading up to dismissal and the dismissal
itself;
• If, before his dismissal, an employee has
acquired a cause of action for breach of
contract that cause of action remains
unimpaired by a subsequent dismissal and
the statutory rights flowing there from.
Botham v The Ministry of Defence
[2010] EWHC 646
• The case concerned an employee who was summarily
dismissed for gross misconduct, which led to his being
placed on a list of persons deemed unsuitable to work with
children. Consequently he was unable to obtain alternative
employment in his chosen profession.
• Following a finding of unfair dismissal the Claimant
brought proceedings in the High Court for damages
arising from breaches of the contractual disciplinary
procedure.
• Slade J found that since all the breaches of express terms
resulted in dismissal, Mr. Botham’s loss arose out of his
dismissal rather than any antecedent breaches. As such it
fell within the Johnson-exclusion zone.
Edwards v Chesterfield Royal Hospital
NHS Foundation Trust [2010] ICR 921
Facts:
• Edwards was a consultant trauma and orthopaedic
surgeon who was summarily dismissed for gross
misconduct following a disciplinary investigation;
• The investigating committee of the GMC later dismissed
a complaint against him based on the same allegations.
• He was subsequently unable to find work as a consultant
and argued that he would be unable to do so because of
the findings against him.
• Edwards alleged that the disciplinary hearing which had
resulted in the findings of misconduct was not conducted
in accordance with the terms of his employment contract.
The Court of Appeal held:
• The decision in Johnson did not preclude a claim for
breach of contract arising out of a disciplinary procedure.
• Where an employee could identify a breach of an
express term of his contract he was entitled to obtain any
remedy available to him under the general law;
• It followed that a breach of contract in the form of a
failure to comply with an agreed disciplinary procedure
was capable of giving rise to a claim in damages;
• Nothing in Johnson or the other authorities suggested
that career loss damages are too remote to be
recoverable.
The implications of Edwards
• The case appears to provide a new and
potentially significant remedy to employees
who are terminated in breach of contractual
procedures, provided they can show that had
the procedure been correctly complied with,
they would not have been dismissed.
• The judgment is not easy to reconcile with
earlier
authorities,
particularly
those
passages in Johnson which express doubt
that breaches of disciplinary rules leading to
dismissal are independently actionable.
Permission to appeal has been granted by
the UKSC.
Mezey v South West London & St. George’s
Mental Health NHS Trust [2010] IRLR 512
• The case concerned a consultant forensic scientist who was
subject to a formal investigation after a patient in her care killed
a member of the public during a period of unescorted leave;
• The findings of the panel were that this was an isolated
misjudgement on Dr. Mezey’s part which fell within the range of
acceptable professional opinion;
• The Trust sought to commence disciplinary proceedings against
her even though its disciplinary policy provided that capability
procedures could only commence where it was established that
a practitioner’s capability to practise was in question.
• The Court of Appeal held that this threshold had not been met.
An injunction was granted prohibiting the Trust from
commencing the disciplinary procedures against the Claimant.
• The decision suggests that injunctive relief might be a more
effective remedy than damages where the employee can
establish that their employer is failing to follow a contractual
disciplinary procedure.
Recent Bonus Cases
James Laddie
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