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Eastwood & Another v Magnox Electric Plc; McCabe v Cornwall County Council, Court of Appeal, 15 July 2004

22 July 2004
The issues

Duty of mutual trust and confidence – Psychiatric harm – Relationship between common law claim and statutory claim

The facts

Eastwood & Another v Magnox Electric Plc

Mr Eastwood and Mr Williams sued Magnox. They worked in the security section of the Magnox Power Station at Wylfa Anglesea. The assumed facts were that Mr Eastwood’s superior had a grudge against him. In May 1996 Mr Eastwood had a disagreement with his superior which was reported to a manager Mr Allen. There then follows a series of events the purpose of which was to secure evidence as a foundation for disciplinary proceedings against him. Individuals were counselled to provide full statements. In June 1996 Mr Allen found Mr Eastwood guilty of misconduct and give him a final written warning for what was a trivial incident. Mr Eastwood appealed in accordance with the firm’s disciplinary code which was interpreted by Mr Allen’s further attempt to challenge his authority. Mr Williams was called to Mr Allen’s office and asked to provide a full statement against Mr Eastwood. When he refused he was threatened with possible investigation and to his own conduct. Mr Eastwood’s appeal succeeded to the extent that his final written warning was reduced to a warning to remain on his file for 6 months. There then followed under the guise of an enquiry attempts to seek information adverse to Mr Eastwood and Mr Williams. As a result of serious allegations made against them both men were publicly suspended from work. A Disciplinary Hearing was heard in respect of Mr Williams. Facts were resumed against him though no witnesses were called to support them. Mr Williams was dismissed. By the time of the Hearing after 4 months of a campaign to demoralise and undermine him he had symptoms of anxiety and fear later diagnosed as a depressive illness. Mr Eastwood’s Hearing was postponed until April 1997 because he was suffering from a depressive illness. He too was dismissed. Both pursued claims for unfair dismissal.

Mr Williams’ complaint resulted in a finding of unfair dismissal. Before a Remedies Hearing took place on Mr Williams’ claim and before any Hearing on Mr Eastwood’s claim a Compromise Agreement was reached which reserved the men’s rights to pursue a claim at common law for any claims they might have in respect of personal injuries arising out of their employment. They then commenced proceedings in negligence and breach of contract alleging psychiatric injury. The Judge struck out both claims as having no reasonable prospect of success following the decision in Johnson Unisys Ltd. The Court of Appeal upheld the Judge’s decision. They stated that the implied term of trust and confidence could not be used in connection with the way the employer/employee relationship was terminated. The Court of Appeal found that the circumstances attending Mr Williams’ dismissal begun in May 1996 and that all those circumstances were considered by the employment tribunal.

The Claimants appealed to the House of Lords.

McCabe v Cornwall County Council

The Claimant was a teacher. Allegations of inappropriate conduct were made by female pupils in 1993. The Claimant did not learn of the allegations until September 1993. He alleged that during the 4 months between May and September he had begun to develop psychiatric illness. Over the subsequent 4 years, there were 3 disciplinary hearings, at the first of which he was given a final written warning. At the second, a Panel of Members of the Governing Body concluded that he should be dismissed, even though his conduct had been “relatively trivial”. He began proceedings for unfair dismissal and was awarded the maximum amount of £11,000.00 by an employment tribunal in 1996.

In March 1997 he commenced proceedings in the High Court for damages for psychiatric illness suing in contract in respect of the County Council’s conduct of the disciplinary procedure leading up to his dismissal and in tort for the losses caused by the procedure and the dismissal itself. In February 2002 he applied to amend his claim by substituting claims in contract in tort, the first being for an alleged breach of the relationship of trust and confidence and the second being for breach of duty to provide a safe system of work.

The Court of Appeal allowed Mr McCabe’s appeal. Cornwall County Council appealed.

The decision

The decision in Johnson created “an exclusion area”. Identifying the boundary of that exclusion area was comparatively straightforward. The statutory code provided remedies for infringement of the statutory right not to be dismissed unfairly. If prior to his dismissal the employee had acquired a cause of action at law for breach of contract or some other right that cause of action remained unimpaired by his subsequent unfair dismissal and the statutory rights flowing from it. Such a cause of action therefore existed independently of the dismissal. Usually if an employer failed to act fairly in his dealings with an employee the employee did not thereby suffer financial loss. The employer suffered a financial loss when he was dismissed and the loss arose because of the dismissal. Therefore in that case the result of claim for loss would fall within the Johnson’s exclusion area.

There were exceptional cases when they would not. An example would be financial loss flowing from a suspension. Another example would be cases such as these whereby an employee suffered financial loss from psychiatric or other illness caused by his pre-dismissal unfair treatment. In such cases the employee had a common law cause of action which succeeded and was independent of his dismissal. He could bring a claim to the employment tribunal in respect of his dismissal. If he brought proceedings in Court and before a tribunal he could not recover overlapping heads of loss twice over.

The practical distinctions of this boundary were not so straightforward. There were drawbacks with this way of proceedings. Firstly there would be duplication of proceedings between the Court and the employment tribunal. Secondly a continuing course of conduct might have to be chopped artificially in separate pieces. In cases involving constructive dismissal a distinction would have to be drawn between loss flowing from breaches of the Trust and confidence term before the constructive dismissal and loss flowing from the employee’s acceptance of the breaches as a repudiation of the contract. The loss flowing from the conduct taking place before the dismissal lay outside the Johnson exclusion area. The loss flowing from the dismissal itself lay within it. This would give rise to some difficult questions of causation particularly in cases such as these where financial loss was claimed as the consequence of psychiatric illness brought about by the employers conduct before the employee was dismissed. This situation created strange results. An employer might be better off to dismiss an employee rather than suspend him. Similarly an employee who was psychology vulnerable was owed no duty of care in respect of his dismissal but he might be owed a duty of care in respect of his suspension. The interrelationship between common law and statute was unsatisfactory. It merited urgent attention by Government.

The Appeal of Cornwall County Council dismissed; the Appeal of Mr Eastwood and Mr Williams allowed.

The Appeal to Parliament is perhaps understandable given the complexities that have dogged the High Courts for some years now. In particular the admission of the difficulties in apportioning psychiatric illness have been highlighted by Lord Nicholls and sooner or later must merit the detailed scrutiny of the House of Lords.

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The content on this page is provided for the purposes of general interest and information. It contains only brief summaries of aspects of the subject matter and does not provide comprehensive statements of the law. It does not constitute legal advice and does not provide a substitute for it.

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