COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE,
CHANCERY DIVISION
THE HONOURABLE MR JUSTICE LIGHTMAN
Strand, London, WC2A 2LL Friday 4th May 2001 |
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B e f o r e :
and
LADY JUSTICE ARDEN
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Bank of Credit & Commerce International SA |
Respondent |
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- and - |
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Ali, Husain and Zafar |
Applicants |
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Smith Bernal Reporting Limited, 190 Fleet Street
London EC4A 2AG
Tel No: 020 7421 4040, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
Ms Annie Hockaway, (instructed by Messrs Lovells for the Respondent)
Mr Isaac Jacob (instructed by Beale & Co for the non-test case Claimants)
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Crown Copyright ©
LADY JUSTICE ARDEN:
Background
a) where an employer conducted a dishonest or corrupt business this was capable of amounting to a breach of an implied term of its contracts of employment not without reasonable and proper cause to conduct itself in a manner likely to destroy or seriously damage the relationship of trust and confidence between employer and employee, andb) that financial loss consequent on damage to reputation was not in principle irrecoverable and that accordingly, if it could be proved that employees had suffered such loss in consequence of a proven breach of the trust and confidence term, then damages would be recoverable if not too remote and subject to the principles of causation.
The test case and the employees' pleaded case on loss
". . .Each of the selected employees contends that he or she has suffered loss and damage as a result of the breaches of contract committed by BCCI S.A.1) Each of the selected employees would have found suitable alternative employment, or would have found such employment earlier than was in fact the case. The loss or diminution of salary and other contractual perquisites are claimed as special damages.
The selected employees will contend that the damages recoverable under this head of claim should be assessed by comparing the period of time which it took a selected employee to obtain suitable alternative employment with the length of time it would have taken a person with similar characteristics who had not been an employee of BCCI. If, as a result of that comparison, a selected employee was kept out of suitable alternative employment for longer than the notional comparator, then the losses sustained by the selected employee should be calculated as the difference between what the selected employee would have earned and what he did earn.
. . .
2) In addition, each of the selected employees is at a handicap on the labour market by reason of the breaches of contract committed by BCCI S.A. In the event that a selected employee should hereafter be thrown on the labour market, the past association with BCCI S.A. will reduce the prospects of finding fresh employment. For the avoidance of doubt, it will be contended that the assessment of this head of damages should be approached by analogy to the case of Smith v Manchester."
"9A) Further, and in support of the contention that employment with BCCI S.A. impaired the employment prospects of those who had worked for BCCI S.A., it is averred that the nature and scale of the dishonesty within BCCI S.A. was such that the Liquidators themselves were unable to identify which employees were reliable and trustworthy and which were not. In the Guardian published on 14th December 1996 Stephen Akers (one of the joint liquidators of BCCI) said:"the bank had for 1,200 employees. Because of the scale of the accusations, we didn't know who we could rely on among the staff. We couldn't take that risk. We had to replace them with our people or from clearing banks"
On 14 January 1992 Christopher Morris (one of the joint liquidators of BCCI) said on Sky News:
"There were allegations of widespread fraud in the Bank and we believe that fraud was manifest from top to bottom in the bank and for that reason it was impossible to use many of the staff except on very mundane tasks."
The selected employees will invite the court to conclude that the conduct of the Liquidators demonstrates the existence and impact of 'stigma'."
The issues before Lightman J
1) what, if any, loss did the employees suffer as a result of breach of the trust and confidence term? and2) was such loss compensatable in damages?
The judgment of Lightman J
1) for the stigma;2) for the financial loss which they contended (without need to focus on actual job applications) must inevitably have been occasioned to them by such stigma (referred to before the Judge as the "a priori claim"); and
3) for the loss which they contended (this time focusing on actual job applications) this stigma in fact inflicted on them.
It is common ground that damages are not recoverable for stigma alone, and we have accordingly not been concerned with the first of these claims.
"63. In respect of losses to date, these were prospective at the date of breach of contract and at the date of the employees' dismissal. With the benefit of hindsight reviewing the employees' experiences over the eight years since the closure of the bank, the court now can and must determine whether each employee has in fact personally suffered actual loss. The second step is to decide the question raised by the bank, namely whether, in respect of such past loss, the loss had to be job-specific, that is to say a loss incurred in respect of a particular job or job application. I agree with Miss Booth, counsel for the employees, that there is no such legal requirement. A former employee is entitled to recover whatever he establishes his financial loss to be: there is no requirement that he shows that the loss is related to any specific job application. The circumstances may be such that financial loss can be established without the need to establish any such application. The evidence may establish that the stigma is such as to preclude any realistic prospect of success of any or any particular job application, or that the stigma created a barrier to particular job applicants; that a particular industry or employer ruled out applications by those affected by the stigma; or that, having regard to the attitude to the stigma of particular employers, applications to those employers by persons affected by the stigma were doomed to failure. In such cases it must be unnecessary for the former employee to go through the barren exercise of even applying for such jobs, and compensation may be available for loss of the chance to obtain such jobs. But whilst there is no such legal requirement, in the absence of evidence of special circumstances such as I have just referred to (and there is no such evidence in this case), the primary guide to the existence of past loss must be the examination of each employee's subsequent job applications, their outcome and the reasons for that outcome; such examination should reveal whether any (and if so, what) financial loss has been suffered."
Submissions on this application
Applicants' submissions
Respondents' submissions
1) the Judge had found as a matter of fact that BCCI's breach had not caused any stigma. He therefore rejected the a priori and statistical cases of the employees.2) The Judge therefore held that there had to be proof of job applications. He found that the test case employees had not shown stigma based on job applications.
3) Evidence would be forthcoming from prospective employers.
4) The Judge rejected the employees' expert, Mr Langman. Accordingly the employees' hypothetical job case could not be run.
5) The Judge held that there was no loss of a chance here anyway. Mr Zafar had been in breach of duty to BCCI.
6) Even on the hypothetical job basis, causation would still have to be shown (see Wilsher v Essex Area Health Authority, above).
7) The chance lost would have to be substantial.
8) There is no support for the employees in the speech of Lord Nicholls. Damages on the basis suggested by the employees would effectively be damages for loss of reputation.
9) Smith v Manchester Corporation above and other cases are all concerned with quantifying actual loss.
10) The court could not infer loss or what the employers would have done.
11) The Judge rightly excluded the "anecdotal" evidence.
12) The "anecdotal" evidence was not determinative.
13) The a priori argument is wrong for two reasons:-
a) it wrongly assumes that an employer would view an employee of BCCI as under a cloud.b) it would be exceptional to have two candidates with similar skills and experience and of equal merit (Judgment, paragraph 170(h)).14) The Judge's findings of fact about Mr Zafar and Mr Husain cannot be challenged.
15) There is no other compelling reason for giving leave. In BCCI v Ali, 16 December 1999, unreported, Peter Gibson LJ and Ferris J have held that non- test case employees should take their cases to trial and obtain findings of fact before any appeal.
Conclusions
Preliminary matters
"2.8.1 . .The general rule applied by the Court of Appeal, and thus the relevant basis for first instance courts deciding whether to grant permission, is that permission will be given unless an appeal would have no real prospect of success. A fanciful prospect is insufficient. Permission may also be given in exceptional circumstances even though the case has no real prospect of success if there is an issue which, in the public interest, should be examined by the Court of Appeal. . . .2.9.1 Permission should not be granted [on a point of law] unless the judge considers that there is a realistic prospect of the Court of Appeal coming to a different conclusion on a point of law which will materially affect the outcome of the case. . ."
Permission to appeal is not usually given on the Judge's findings of primary fact but may be given in appropriate cases where the question is whether the Judge drew the correct inferences (Practice Direction, paragraph 2.10.1).
"21 I agree with Mr Jeans. No case has been shown where this Court, on an appeal, has been asked to decide issues of law which have not been shown to be relevant in the light of established facts. In my judgment the objections taken by Mr Stafford to the course advocated by Mr Jeans and suggested in the offer to which I have referred, do not overcome that real difficulty. We know from the cautionary words of Lord Steyn that it is improbable that many ex-employees of BCCI will be able to succeed in a stigma claim. The fact that five selected employees all failed in their claims only strengthens the view that there may be very few, if any, for whom the points of law decided by the Judge and which the applicants wish to appeal, represent an actual controversy between them and BCCI to be determined as a live issue.22 The applicants have not yet discharged the burden on them to substantiate their individual claims for financial loss and there is no determination yet of any factual matrix. Why should the liquidators of BCCI, at this stage, have to respond to an appeal when the issues to be raised may never in practice be resolved? I do not envisage any practical difficulty over the adducing of evidence caused by the Judge's ruling. If the evidence which, by the Judge's ruling, is not relevant were to be adduced by an applicant, the Judge could be asked to make the findings on that evidence so that the applicant would be able to take the point founded on that evidence to appeal; and I would expect the Judge to comply with that request. If he was not prepared to do so, there is no reason why that should not be the subject of an appeal to this Court."
Real prospect of success as to error of law?
Real prospect of success on the facts?
The public interest in this case
The position of Mr Zafar
Case management directions
Application to intervene
Disposition
LORD JUSTICE CHADWICK: