England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
EXETER DISTRICT REGISTRY
His Honour Judge Overend

		Royal Courts of Justice Strand, London, WC2A 2LL
		23 December 2002

Lord Justice Auld:

1. This is an appeal by Mr. Robert Jocelyn McCabe against an order of His Hon. Judge Overend on 31^st May 2002, sitting as a High Court Judge in Exeter, refusing him permission to amend his statement of claim by substitution of a new claim and striking out his claim as disclosing no cause of action. The proceedings arise out of an original claim by Mr. McCabe, a teacher employed by the Respondents, for damages for psychiatric injury in respect of events leading up to and arising out of their dismissal of him. By his proposed amendment, Mr. McCabe sought to substitute and limit his claim to damages for breach of an implied contractual duty of mutual trust and confidence and/or in negligence in respect of their suspension and manner of investigation of his conduct prior to dismissal.
2. The appeal raises two main issues. The first is the extent to which an employee who has been unfairly dismissed is confined, in respect of injury caused by unlawful conduct of his employer prior to and leading to dismissal, to the statutory remedy for such dismissal of a compensatory award from an employment tribunal. The issue, thus narrowly stated, is an illustration of the broader tension between, on the one hand, a need for certainty and tidiness in the avoidance of an overlap between common law and statutory remedies and, on the other, the interest of justice or fair play in preserving established common law rights where statutory remedies may not provide an adequate substitute for them. The second issue is whether, in the circumstances, the Judge should have refused permission to amend and should have struck out the claim as disclosing no cause of action or, as provided by CPR, Part 3.4, as disclosing no reasonable grounds for bringing it.

The facts

3. I take the facts, as the Judge did, from the statement of claim and adopt with gratitude much of his helpful summary of them. Mr. McCabe began work as a teacher at the school for which the Respondents were responsible in September 1991. In early May 1993 a number of girl pupils made complaints against him of inappropriate sexual conduct. Five days later the head teacher suspended him, and about a week later, on 26^th May, interviewed him. In the interview the head teacher gave him no details of the allegations, but offered him a formal written warning, which he declined to accept. While remaining under suspension, nearly four months elapsed before he learned of the allegations made against him in a letter of 20^th September 1993 requiring him to attend a disciplinary hearing. It was during that period, according to the proposed amended statement of case, that he began to suffer from the psychiatric illness in respect of which he now seeks to claim damages.
4. Over the following three years there were three disciplinary hearings, each resulting in a determination adverse to Mr. McCabe. The first was in November 1993 conducted by three members of the Second Respondent, the School's Governing Body, who gave him a final written disciplinary warning. The second, which was by way of an appeal to three other members of the Governing Body, concluded in their decision that he should be dismissed notwithstanding that they characterised his alleged conduct as "a relatively trivial affair". As a result, the First Respondent, Cornwall County Council, dismissed him on 15^th March 1994. His response, given the greater severity of this outcome than that at the first hearing, was to request a further disciplinary hearing. He also sought compensation for unfair dismissal against both Respondents before an industrial tribunal under the statutory predecessors of Parts X and II of the Employment Rights Act 1996. Both those procedures were delayed because Mr. McCabe continued to suffer from the psychiatric illness triggered by his initial suspension. The third disciplinary hearing took place first. It was conducted by three members of the County Council over four days in July and August 1996. Although it purported to be an appeal by way of rehearing, no evidence, other than mostly unsigned written statements drafted by a member of staff, was called from the complainants. This body too dismissed his appeal, confirming his dismissal.
5. Three months later, in November 1996, an industrial tribunal heard Mr. McCabe's complaint of unfair dismissal, and, in December 1996, upheld it. It did so because the manner of dismissal was in breach of the Respondents' disciplinary procedures in that a senior member of the School's staff had not promptly investigated the matter and that all but one of the written statements attributed to the complainants were unsigned. The tribunal deferred a decision as to contributory fault and as to the amount of compensation to be awarded in order to give the parties an opportunity to settle the matter. At an adjourned hearing in April 1997 the tribunal ordered payment to Mr. McCabe of compensation of £11,000, the then maximum sum awardable under the statutory scheme, but found him to be contributorily at fault to the extent of 20%. On appeal by both parties to the Employment Appeal Tribunal, the Tribunal upheld the finding of unfair dismissal but quashed the finding of contributory negligence.
6. Meanwhile, in March 1997 Mr. McCabe commenced these proceedings in the High Court seeking damages for psychiatric illness in contract caused by the Respondents' conduct of the disciplinary procedure leading up to his dismissal and in tort caused by such procedure and by the dismissal itself. The progress of the claim was slow. Given Judge Overend's refusal to strike it out for delay and that his decision in that respect is not challenged by the Respondents, I need not rehearse the reasons for the delay and the procedural skirmishing that it engendered. It is sufficient to note that it was not until February 2002 that Mr. McCabe applied to amend his claim by substituting for it claims in contract and in tort for damages for psychiatric injury caused by the Respondents' initial suspension of him and failure, over the four months from May to September 1993, to inform him of the allegations against him, and for their failure during that period to carry out a proper investigation. The claim in contract was for alleged breach of a relationship of trust and confidence, and the claim in tort, based on the same facts, was for breach of duty to provide a safe system of work. Those claims did not include, as the original ones had done, claims for damages caused by the dismissal itself. The new pleading was accompanied by a medical report of 5^th March 1997 stating that Mr. McCabe was suffering from a psychiatric illness attributable to his suspension in May 1993 and the accompanying failure to inform him of the allegations and to make proper investigation.
7. The Respondents sought strike-out of the new claim on the basis that it was essentially the same as the original, namely a claim for damages caused by the manner of his dismissal. They maintained that the authorities showed that such a claim was no longer possible as a result of the introduction of the statutory remedy of compensatory awards for unfair dismissal. Mr. McCabe maintained that the statutory remedy had not ousted his new claims because he was not seeking damages caused by the manner of his dismissal but by matters preceding it.

The authorities

8. Before I turn to the Judge's reasons for striking out the claim, I should briefly summarise the effect of the main authorities with which he was confronted. The starting point is the now well established principle, acknowledged by the House of Lords in Mahmud v. BCCI [1998] AC 20, that there is a mutual obligation implied in every contract of employment, not, without reasonable and proper cause, to conduct oneself in a manner likely to destroy or seriously damage the relationship of trust and confidence between an employer and employee. The obligation, the employer's alleged breach of which the House ruled disclosed a reasonable cause of action, was not to carry on a dishonest or corrupt business the stigma of which might imperil its employees' chances of future employment. In so ruling, the House heavily qualified its own much older decision in Addis v. Gramophone Company Ltd. [1909] AC 488 that a wrongly dismissed employee could not recover, in addition to damages resulting from his dismissal, damages for the manner of the dismissal in the injury caused to his feelings or to his prospects for obtaining fresh employment. In Mahmud Lord Nicholls, with whom Lords Goff and Mackay agreed, explained, at page 39C-D, the extent of the loosening of the Addis shackle:

"In my view these observations [in Addis] cannot be read as precluding the recovery of damages where the manner of dismissal involved a breach of the trust and confidence term and this caused financial loss. Addis … was decided in the days before this implied term was adumbrated. Now that this term exists and is normally implied in every contract of employment, damages for its breach should be assessed in accordance with ordinary contractual principles. This is as much true if the breach occurs before or in connection with dismissal as at any other time." [my emphasis]

However, as Lord Steyn, with whom Lords Goff and Mackay also agreed, observed at page 52B, the claims in that case were clearly not based "on the manner of a wrongful dismissal but on a breach of contract which is separate from and independent of the termination of the contract of employment."

9. In Gogay v. Hertfordshire County Council [2000] IRLR 703 this Court applied the Mahmud principle by upholding an employee's common law claim against her employer for damages caused by unjustifiable suspension not followed by dismissal. The claim was in contract for breach of an implied term of mutual trust and confidence for damages for clinical depression caused by the suspension coupled with failure properly to investigate the circumstances giving rise to it. Lady Justice Hale, with whom Peter Gibson and May LJJ agreed, distinguished the case from a ruling of the Court of Appeal in Johnson v.Unisys Ltd.[1999] ICR 809, later affirmed in the House of Lords ([2001] 2 WLR 1076), striking out an employee's common law claim for damages allegedly caused by the manner of his dismissal, as disclosing no reasonable cause of action. In paragraph 68 of her judgment, she said that Gogay was distinguishable because it related to a suspension, which manifestly contemplated the continuation of the employment relationship. The Lady Justice, who had other concerns about the effect of Johnson (see paragraph 67), added in paragraph 69:

"I recognise that this produces the strange result that, according to Johnson, the defendant authority would have done better had they dismissed rather than suspended the claimant. That simply reinforces my view that the sooner these matters are comprehensively resolved by higher authority or by Parliament the better."

10. A distinguishing feature of Johnson in this context was, not only that it involved a dismissal, but also that the dismissal followed quickly on the complaints giving rise to it. Within days of them being made he attended a meeting at which no specific allegations were put to him and later the same day he was dismissed. Following failure of an internal appeal he applied to an industrial tribunal for compensation for unfair dismissal and to the County Court for damages for loss of earnings of over £400,000. The latter claim was in contract for psychiatric injury caused by breach of an implied term of trust and confidence to treat him fairly, and/or in negligence, arising out of the manner of his dismissal. The House held by a majority of four to one that his complaint lay within the jurisdiction of the industrial tribunal and that there was no common law remedy for unfair circumstances attending dismissal whether in contract or in tort. The rationale of the majority (Lord Bingham of Cornhill, Lord Nicholls of Birkenhead, Lord Hoffmann and Lord Millett; Lord Steyn dissented) was that Parliament, in introducing a statutory right to compensation for unfair dismissal, before a separate tribunal, subject to its own special procedures and with a limited compensatory award (the maximum was then £11,000), must have intended that it could not coexist with a common law right for damages for the manner of dismissal. In the course of this appeal Sedley LJ described the ratio more pithily as being that there is no remedy at common law for any wrong justiciable under the employment legislation, that is, no overlap of jurisdiction.
11. It is clear from the facts of Johnson that the House did not have to consider the effect of their decision on a case where disciplinary proceedings, possibly accompanied by suspension, have not resulted in dismissal, or where they have, but the focus of the complaint is on the manner of the employer's investigations before embarking on proceedings leading to dismissal. As to the former, suspension not followed by dismissal, Gogay was cited to them in argument and mentioned by Lord Steyn, at para. 19, in the context of a move away from Addis. The House must be taken to have been aware of the Court of Appeal's application of the mutual trust and confidence principle to such facts; yet it did not expressly approve or disapprove of it. As to the latter, investigation with or without suspension culminating in dismissal, the facts of Johnson did not require consideration of how and in what circumstances the Gogay approach might have to be applied, say, to an extended period of investigation and suspension, leaving the manner of dismissal as a separate matter for an employment tribunal.
12. A common feature of the speeches in Johnson of Lord Hoffmann, at para. 46, and Lord Millett, at para. 78, with whom Lord Bingham agreed, was that the Mahmud principle of an implied relationship of mutual trust and confidence was concerned with the preservation of such a relationship, not as to the manner of its termination. However, both Law Lords were clearly uneasy about the "tidiness" of that distinction. Thus, Lord Hoffmann mused at paragraph 46:

"It may be a matter of words, but I rather doubt whether the term of trust and confidence should be pressed so far. In the way it has always been formulated, it is concerned with preserving the continuing relationship which should subsist between employer and employee. So it does not seem altogether appropriate for use in connection with the way that relationship is terminated. If one is looking for an implied term, I think a more elegant solution is McLachlin J's implication [in Wallace v. United Grain Growers Ltd. (1997) 152 DLR (4^th) 1, 39 of a separate term that the power of dismissal will be exercised fairly and in good faith. But the result would be the same as that for which Mr. Johnson contends by invoking the implied term of trust and confidence. … I think it would be possible to reach such a conclusion without contradicting the express term that the employer is entitled to dismiss without cause."

13. Lord Millett, in saying much the same, at paragraph 78, prompts a question as to whether a principled distinction can be drawn from reliance upon an implied term of mutual trust and confidence in proceedings where the relationship has in fact come to an end, albeit without formal termination by either side, and those where the parties' conduct one way or the other eventually leads to dismissal or constructive dismissal:

"I agree with Lord Hoffmann that it would not have been appropriate to found the right on the implied term of trust and confidence which is now generally imported into the contract of employment. This is usually expressed as an obligation binding on both parties not to do anything which would damage or destroy the relationship of trust and confidence which should exist between them. But this is an inherent feature of the relationship of employer and employee which does not survive the ending of the relationship. The implied obligation cannot sensibly be used to extend the relationship beyond its agreed duration. Moreover, manipulating it for such a purpose would be unrealistic. An employer who summarily dismisses an employee usually does so because, rightly or wrongly, he no longer has any trust or confidence in him, and the real issue is: whose fault is that? That is why reinstatement or re-engagement is effected in only a tiny proportion of the cases that come before the employment tribunals."

14. Eastwood & Williams v. Magnox Electric PLC [2002] EWCA Civ 463, was another dismissal case, but one in which the "run-up" to actual termination of the claimants' employment was very much longer than that in Johnson. The two claimants alleged that they had been subjected to long periods of harassment in the form of a spurious disciplinary investigation, each coupled with suspension followed by dismissal. In the case of Eastwood, the period of harassment was one year, for the last eight months of which he was suspended, and in the case of Williams the corresponding periods were four and two months. Each of them claimed in contract, for breach of an implied mutual duty of trust and confidence and in negligence, for damages for stress related illness, depression and disability caused by that conduct. The Court of Appeal, on the authority of Johnson, upheld the ruling of the Judge below striking out the claims under CPR 24.2 and 3.4 on the grounds that they had no real prospect of success and that the statements of case disclosed no reasonable grounds for bringing the claims. However, in doing so and possibly in deference to the last sentence in Lord Nicholls' observation in Mahmud, at page 39C-D (see paragraph 8 above), Peter Gibson LJ, with whom Mantell LJ and Sir Swinton Thomas agreed, allowed for the possibility that the Johnson ruling might not bar all such claims at common law for unfairness in the conduct of domestic disciplinary procedures eventually culminating in dismissal. He said in response to the claimants' counsel's argument that Johnson was not intended to, and did not, preclude a common law claim for breach of mutual trust and confidence in respect of conduct which ante-dates the dismissal and was not part and parcel of it:

"23. Attractively though these submissions were advanced and whilst … I can readily see that there could be very great difficulties arising in other cases, for example a case where constructive dismissal might have been but was not asserted, I am not able to accept Mr. Hunter's arguments. It is … plain that in Johnson the majority of the House of Lords held that unfairness in the manner of dismissal of an employee does not give rise to a common law action, whether it be founded in contract or in tort, but must be the subject of Employment Tribunal proceedings. The implied term of trust and confidence cannot be used in connection with the way the employer/employee relationship is terminated. There may be cases where the particular manner in which an employee is dismissed or the circumstances attending dismissal is or are confined to events occurring at the same time or immediately before the dismissal. In other cases that manner and those circumstances may include a pattern of events stretching back over a period. It is a question of fact for the trial judge to determine in each case. [my emphasis]

24. In the present case I venture to suggest that the position is tolerably plain and uncomplicated. The two claimants were actually dismissed. Mr. Hunter accepts that the dismissals were part of the unfair circumstances. The claimants did apply to an employment tribunal; and in Mr. Williams' case we have the benefit of the Employment Tribunal's Extended Reasons. From them we know what facts were considered by that Tribunal as relevant to the claim that Mr. Williams was dismissed unfairly and that, in the Tribunal's words, 'the immediate circumstances which finally resulted in his dismissal began in May 1996' when Mr. Eastwood on 1^st May was accused of abusive, aggressive and intimidatory behaviour towards Mr. Owens. Over the next six pages the Employment Tribunal consider 'the broad circumstances which led to the dismissal of Mr. Williams'. They support the judge's view of how the boundaries imposed by Johnson affect the issues in the case; and the compensation which was recoverable in the Employment Tribunal covered the substance of what Mr, Williams now seeks to recover in the county court proceedings. …

25. Mr. Eastwood's position is on its face slightly different, because there was no hearing in, or decision from, the Employment Tribunal on his complaint … But I cannot believe that that puts him in any different position, given that his case was so intertwined with that of Mr. Williams and that after commencing proceedings before the Employment Tribunal, when Mr. Williams' case was decided Mr. Eastwood was able to recover an agreed sum in compensation. …" [my emphasis]

15. The problem is how to draw the boundary between the two jurisdictions in the circumstances of each case. Peter Gibson LJ, in upholding the judge's ruling, appears to have approved of the test he had applied, namely that the court could not consider conduct within the purview of the employment tribunal, which, on the particular facts, included those acts which had taken place since the disciplinary machinery began to run (see paras. 20(2) and 26 of Peter Gibson LJ's judgment).

The judgment under appeal

16. The present case proceeded on the same footing as that in Eastwood and Williams, namely that the factual allegations of Mr. McCabe were true. Judge Overend appears to have based his decision to strike out the claim on three main factors. The first was the broad similarity, as he saw it, between the facts of this case and those in Eastwood and Williams, namely that they were "complaints about the procedures prior to dismissal". The second was that, on his view of the ratio of Gogay and that of Johnson, the Gogay principle of entitlement to recovery at common law for injury caused by the manner of disciplinary proceedings, including suspension but falling short of dismissal, has no application where dismissal in fact follows. He said, at page 6 of his judgment:

"… where a claimant has actually been dismissed, as was Mr. McCabe, the authority of Gogay will not avail him, in the light of … Johnson and …Eastwood. In this case the matters over which complaint is now sought to be made are all within a relatively narrow compass over a few days in May 1993, leading up to the suspension of the Claimant, followed by the failures of the First Defendants to tell the Claimant what allegations had been made against him for some four months up to September 1993 or to carry out a proper investigation themselves through a senior member of staff. These allegations all seem to the court to fall precisely within the Johnson rationale, as elaborated by Eastwood.

… The activities (or inactivities) complained of by the Claimant are all part and parcel of the events that led up to the claimant's dismissal and are caught by the Eastwood extension of the Johnson principle."

The third factor was that Mr. McCabe's claim, as presented to the industrial tribunal and before the Employment Appeal Tribunal, covered the substance of what he sought to claim in these proceedings.

The submissions in the appeal

17. Mr. Satinder Gill, on behalf of Mr. McCabe, prefaced his submission with an observation reminiscent of that of Lady Justice Hale in Gogay (see para.9 above) that, if Judge Overend is correct in his view of the combined effect of Johnson and Eastwood and Williams that no common law action lies for the manner of domestic disciplinary conduct where it is followed by dismissal, employers will have an incentive to dismiss suspended employees who fall ill whilst suspended.
18. Mr. Gill's first submission was that there is no such rigid rule, noting that the House of Lords in Johnson did not need to consider the possibility of separate claims. All the events culminating in dismissal had occurred over such a short period that it would have been difficult, if not impossible, to disentangle injury caused by the manner of dismissal from that anterior to it. He had to acknowledge that the same could not be said about Eastwood and Williams, where the Court of Appeal upheld a strike-out of the claim in respect of a dismissal process extending up to a year. However, he drew on Peter Gibson LJ's acceptance in paragraph 23 of his judgment that drawing the boundary between injury compensatable at common law and that under the statute was a question of fact for the trial judge to determine in each case.
19. Mr Gill's second submission – though it overlapped with the first – went to the interpretation and application of the meaning of "dismissal" in section 95(1) of the 1996 Act and of a "compensatory award" under section 123(1) of the Act. Section 95(1) defines "dismissal" in three ways, the criterion of each of which is termination of the employment, whether by the employer or by expiry of a fixed term or by the employee (constructive dismissal). A "compensatory award" is defined in section 123(1) as:

"such amount as the tribunal considers just and equitable in all the circumstances having regard to the loss sustained by the complainant in consequence of the dismissal in so far as that loss is attributable to action taken by the employer."

The effect of these definitions, Mr. Gill submitted, is that the Act only provides for losses flowing from termination, not for losses caused by acts or omissions occurring prior to it. He acknowledged that, depending on the facts, the manner of some conduct before actual dismissal may be so closely bound up with it in time and in circumstance that it falls to be considered under the Act. However, he said that, as Peter Gibson LJ envisaged, there may be other cases in which the conduct complained of is so distinct in time and in nature that it cannot fairly be said to be so bound up with the dismissal so as to be part of it. He submitted that Judge Overend's seeming application of a general rule that, whenever there had been dismissal, there could be no claim for compensation for personal injury caused by conduct leading up to, but not part of the dismissal, was to ignore the fact-sensitive nature of the meaning of dismissal in this context and to go further than Johnson as interpreted in Eastwood and Williams. If correct, its effect could be to preclude a dismissed employee recovering any compensation at all for injury resulting from conduct, such as suspension, before that termination, either under the Act or at common law.

20. Mr. Gill's third submission was that this was not an appropriate case for a strike-out. He said that, pursuant to CPR 3.4(2)(a) and 24.2(a)(i), the Judge could only properly have struck out the claim if it had disclosed no reasonable grounds for bringing it or if it had disclosed no real prospect of success. He maintained that neither could be so here, in a developing area of law and where the outcome could be expected to turn in large part on questions of law and fact for the trial judge. As he put it, Mr. McCabe's claim, on the medical evidence, was that his illness was caused by the initial four months suspension from May to September 1993 coupled with the failure to inform him of the details of the allegations. The extent to which that conduct could be described as an aspect of the manner in which he was dismissed could not properly be determined without a full consideration of the evidence.
21. Mr. Richard Mawhinney, for the Respondents, submitted that the decision in Johnson was fatal to Mr. McCabe's claims, both in contract and in tort and in their original or amended form. Both claims concerned the manner of his dismissal, which process began in May 1993 when he was suspended and that anything that happened thereafter was part of the process of dismissal. He maintained that the employment legislation, in providing a remedy for unfairness of dismissal, included unfairness in the procedure as well as the reasons for dismissal. He acknowledged that it may be a question of fact in each case how far back from the dismissal the manner and circumstances of the process leading to it may extend before ceasing to be part of the dismissal itself. However, he relied on what he submitted were the similar circumstances of the nature of the allegation in Johnson, of failure to detail the allegations and comply with a fair disciplinary process, and on the lengthy investigative process before dismissal in Eastwood and Williams, where the Court of Appeal upheld the order of the judge below striking out the claims. He added, rightly in my view, that it is not necessary to look at the way in which the industrial tribunal or Employment Appeal Tribunal considered the case. But he said that, if it were necessary, he would rely on Judge Overend's finding that the substance of Mr. McCabe's claim before those tribunals was the same as that in these proceedings and is, therefore, caught by the combined effect of the decisions in Johnson and Eastwood and Williams. As to the propriety of the Judge striking out the claims, he maintained, again in reliance on the Court of Appeal's decision on the facts in Eastwood and Williams, that this too, on Mr. McCabe's own version of the facts, was a straightforward case for a strike-out.

Conclusion

22. The law on this matter is clearly still in a state of development, not least because the House of Lords in Johnson did not expressly approve or disapprove of the Court of Appeal decision of Gogay and did not, on the facts of the Johnson case, need to do so. Part of the problem lies in the uncertainty inherent in the application on a case by case basis of the word "dismissal" in the employment legislation, given the "just and equitable" test available to a tribunal in determining compensation for loss consequent on dismissal, and part in the extent and application on a case by case basis of the common law remedy for unlawfulness in the manner of dismissal, and the potential for overlap permitted by such uncertainties.
23. As to the former, uncertainty in application on a case by case basis of the statutory test of "dismissal", Lord Hoffmann said, at paragraph 55 of his speech in Johnson, that loss caused by the unfair manner of dismissal is a consequence of the dismissal and may form the subject matter of a compensatory award. In saying that, he departed, as employment tribunals appear to have done for some time, from the ruling of the National Industrial Relations Court in Norton Tool Co. Ltd. v. Tewson [1973] ICR 45 that a tribunal should award compensation only for financial loss and not for the manner of dismissal. He justified that departure by reference to the "just and equitable" formula in the definition of a "compensatory award". Whether or not that approach "is quite breathtaking in its potential implications for the compensatory award", as one academic has put it (Hugh Collins, in a case note on Johnson in 31 ILJ 305, at 309), the scope that it gives for unevenness in application remains a problem when looking for a clear line between the statutory and common law remedies.
24. As to the latter, uncertainty in the extent, and its application on a case by case basis, of the common law remedy for unfair manner of dismissal, it seems to me that the following assessment of Johnson by Professor Bob Hepple, QC, and Gillian Morris in an article on The Employment Act 2002 (2002) 31 ILJ 245, at 253-254, may be unduly pessimistic, at least in relation to conduct prior and leading to dismissal which may not on its facts properly be regarded as part of the dismissal itself:

" … in Johnson the House of Lords, by a 4:1 majority, stopped the common law developing 'to reflect modern perceptions of how employees should be treated fairly and with dignity' in the context of dismissal. …

The argument that Parliament had intended to freeze out the development of the common law by creating a statutory remedy for unfair dismissal is contentious; the absence of any reference to the common law in the legislation may have occurred because Parliament was content to let the courts develop it in the usual way. Indeed, it would be open to the courts to reason by analogy that a requirement for employers to follow a fair procedure is not regarded by Parliament as unduly onerous. The majority's reasoning means that although the exercise of the power to suspend must be exercised with due regard to trust and confidence, the more drastic power of dismissal is free from any equivalent constraint. ..."

See also Douglas Brodie, Legal Coherence And The Employment Revolution, 117 LQR 604, at 624-625

25. It also seems to me that the potentially strange result of Johnson - identified by Lady Justice Hale in Gogay – that it will encourage employers to dismiss at an early stage where they might otherwise content themselves with suspension pending completion of their investigations - is avoidable by the courts without the intervention of Parliament.
26. The way forward was, I believe, first indicated by Lord Nicholls in the passage from his speech in Mahmud, at page 39C-D to which I have referred (see para. 8 above), that every contract of employment now contains a duty of mutual trust and confidence, damages for breach of which should be assessed on ordinary contractual principles whether the "breach occurs before or in connection with dismissal as at any other time". And Peter Gibson LJ, in Eastwood and Williams, with the benefit of the tension between Gogay and Johnson clearly in mind, identified it more precisely at the end of paragraph 23 of his judgment when he said that it is a question of fact for the trial judge to determine on the facts of each case whether the manner of dismissal or circumstances attending it are confined to events at the same time or immediately before the actual dismissal. Whilst he found to the contrary on the facts of that case, it is important that those facts should not be taken as a blue-print for the same response in all cases where there is a broadly similar or greater length of disciplinary process culminating in dismissal.
27. Judge Overend appears to have proceeded on the basis that the combined effect of Johnson and Eastwood and Williams is that once there is a dismissal the nature and duration of the events preceding and eventually giving rise to it, if comparable with what sufficed for the trial judge and the Court of Appeal in Eastwood and Williams, is an automatic bar to a common law action in respect of conduct which, but for the dismissal, would have entitled a claimant to bring such an action. But, as I have said, the essential question is where, on the facts of any particular case, should the line be drawn between dismissal caught by the legislation and conduct prior to it causing injury compensatable in damages at common law. The actual decision on the facts in Eastwood and Williams should not be treated as part of the ratio in the sense that it is a binding comparison. The question is not just one of the length of the disciplinary process eventually giving rise to dismissal. There may be many other relevant factors. For example, an employer may not embark on disciplinary proceedings with dismissal in mind and may only come to it late in the day when he discovers that the complaint is much more serious than he at first thought. So, the consistency of conduct and intention of the employer at different stages of the process may be relevant, as also may be: the nature and pattern of any warnings; whether there is a natural break in the process before dismissal becomes a practical proposition; and the attribution of the alleged injury to the time and nature of the particular conduct of which complaint is made. All such matters, and no doubt others, fall to be considered on a case by case basis. Perhaps Mr. Mawhinney put his finger on it when, in argument, he accepted that investigation and suspension, to be included in the statutory definition of "dismissal", must be "part of the procedure" of dismissal. His other suggested test of "an unbroken causal chain" leading to dismissal is not so apt. Such a chain of causation is a different concept from whether conduct is so close to dismissal in time and circumstance as to be included in it. The former may be very long in time and in the number and varying strength of its links, the latter is more a matter of feel on the particular facts of each case.
28. Here, as Mr. Gill submitted, there were a number of potentially distinguishing factors between Mr. McCabe's case and that of Eastwood and Williams. One was that there seems to have been no fixed intention from the outset to dismiss Mr. McCabe, whereas there clearly was such an intention on the assumed facts in Eastwood and Williams. Another was that in Mr. McCabe's case the employer's progress towards dismissal only started after Mr. McCabe began to suffer from the psychiatric injury in respect of which he claims, whereas in Eastwood and Williams the progress started before they began to suffer their injuries; and in Johnson it was the confirmation of dismissal that triggered the psychiatric injury.
29. As to the suggested similarity of the claims before the industrial tribunal and that now sought to be made in these proceedings, I should caution against such comparisons of the "substance" of the claim in the two jurisdictions. There may be sound policy and conceptual reasons for looking for a certain and "tidy" outcome, that is, of avoidance of overlap between compensation for unfair dismissal and common law damages for breach of duty associated with and prior to it. I have in mind the concerns expressed by Lord Hoffmann in Johnson at paragraphs 47-50 of his speech as to difficulties of attribution in causation and to the open-ended nature of a common law liability in this context. I also have in mind the problems for the claimant in having to separate his claims, that is, to bring his statutory claim first, within the three months time limit permitted for it, and the common law claim second, albeit with the greater latitude of the three years limit for personal injury claims, for additional loss not flowing from his dismissal but from his employer's unlawful conduct prior and leading to it. However, the other side of the coin may be that the tribunal may not award all the compensation claimed before it because it does not regard it as a consequence of the "dismissal" and/or its possible maximum award under the legislation may not, in any event, be sufficient to cover the seriousness of the loss caused by such conduct. In such a circumstance, unless there is some scope for appropriately separate treatment of the two forms of claim, a claimant could be left without adequate remedy in either jurisdiction for loss attributable to prior unlawful conduct which, but for the supervening dismissal, would have been available to him at common law.
30. I should add, that to identify any offending overlap or exclusion of liability by reference to how the case was put before a tribunal or as to the basis of the tribunal's award is not, in my view, a logical or permissible way in which to determine whether a common law claim survives the fact of termination of employment. The facts on which the common law claim turns are for the court to decide, not a tribunal. And the existence of a common law entitlement does not, or should not, depend on whether the claimant has in fact made a claim to a tribunal for compensation for unfair dismissal, or, if he has, how he framed the claim or how the tribunal characterised it and dealt with it. Such matters may be relevant to an assessment of the credibility or other reliability of his evidence in the common law claim, but that is all – and rarely, if at all, at the strike-out stage. It may be – and I express no view on this – that if he has succeeded in obtaining a compensatory award from a tribunal, the extent and make-up of the award could have some bearing on the amount of damages, if any, which he could recover in a common law claim, if only to prevent inadvertent double recovery. But that is a different question from the survival of a separate and discrete common law remedy notwithstanding recovery for unfair dismissal before a tribunal. I do not understand Peter Gibson LJ's reference to such matters in paragraphs 24 and 25 of his judgment in Eastwood and Williams (see para. 14 above) in support of the view of the judge below to be part of the ratio of his decision.
31. In any event, there is a wider point of principle that the existence of a common law claim in any given case should not depend on the chance that an employer chooses not to terminate the contract by dismissal or that an employee chooses not to treat his employer's improper conduct as amounting to constructive dismissal. In the latter circumstance, the extent of the common law right would leave the employee with a dilemma that surely the legislature cannot have contemplated - still less have intended - of requiring him to choose early in the piece between accepting constructive dismissal and losing his common law claim or retaining his common law claim and losing his statutory entitlement for unfair dismissal. Such a dilemma could produce great injustice in cases where there has been a malicious attempt by an employer to force constructive dismissal. Mr. Mawhinney, in argument, recognised such a dilemma sub silentio when acknowledging that, if there had been no dismissal in the present case, there might well have been a claim actionable at common law.
32. For all those reasons, I am of the view that the Judge wrongly struck out this claim as disclosing no cause of action and that he should have allowed the matter to proceed on the proposed amended statement of case, leaving it to the trial judge to determine the matter in accordance with the law as indicated, so far, by the authorities and on the particular facts of the case. I would accordingly allow the appeal.

Lord Justice Brooke :

33. I am very uneasy about certain aspects of the present state of the law, which appear to me to warrant re-examination by the House of Lords, or by Parliament, at an early date. On the present appeal I agree with Auld LJ that Mr McCabe's claim should not be struck out, for the reasons he gives. In the present developing state of the law it would be wrong for liability to be determined before the underlying facts are ascertained. I also agree with the judgment of Sedley LJ. I am adding this short judgment of my own in order to explain my unease.
34. The writ in this action was issued on 4th March 1997. The claimant annexed to his statement of claim a short psychiatric report, written on 4th March 1996 by Dr Hand, a consultant psychiatrist who had known him since October 1994. She said he had been in contact with the psychiatric services since June 1994.
35. She attributed his reactive depression and post-traumatic stress disorder ("PTSD") to his dismissal in 1994. She reported that since his dismissal he had found it very difficult to think or plan, and that he had problems in concentrating. In December 1994 she had prescribed psychotherapy. Because this did not help him, she felt that his condition was intractable, and that he would be incapable of returning to teaching on the grounds of ill health for the foreseeable future.
36. On the basis of this report it was averred in the original statement of claim (dated 3rd March 1997) that "following the Plaintiff's dismissal on 13th March 1994" he had suffered from the psychiatric disorders mentioned in Dr Hand's report. A claim for over £46,000 past loss of earnings and just over £145,000 future loss of earnings accompanied the statement of claim. This claim, as thus formulated, was bound to fail on the authority of Johnson v Unisys Ltd [2001] 2 WLR 1076.
37. Four days before the writ was issued Mr McCabe saw a different psychiatrist, Dr Smith. Her report is dated 5th March 1997. It is very much fuller, and it draws in part on GP's notes and the psychiatric notes from Cornwall. There does not appear to be anything in this report which suggests that either the head-teacher or his employers would have regarded Mr McCabe as psychologically vulnerable prior to the events which Auld LJ describes in paragraph 3 of his judgment.
38. From this report it appears that Mr McCabe received no significant medical treatment in connection with any of these matters until March 1994 when he was prescribed Diazepam, which was continued for a few months. In June 1994 he was diagnosed by a consultant psychiatrist as suffering from a stress reaction, and thereafter he received care, support, medication and counselling, principally from a community mental health team.
39. In this report the history of his psychiatric troubles was taken back to the day in May 1993 when he was first told, in general terms, of what was being alleged against him. His initial reaction was one of terror (because he had to tell his wife he had been suspended, and the reason for his suspension). A week later, when he was offered a formal written warning, he was said to have been devastated. He felt he had been judged to be guilty without any proper investigation having been conducted.
40. Mr McCabe told Dr Smith that since that time he had been tormented by very distressing psychological symptoms, including feelings of anger, frustration, helplessness and powerlessness, depression, anxiety, comfort eating, a two-stone weight increase, nausea and a pre-occupation with the unjust way that he perceived he had been dealt with. He had also suffered from very severe insomnia since May 1993 and from migraine headaches which he believed to be tension-related. It is on Dr Smith's report that Mr McCabe's amended statement of case is based. His claim for damages remains unaltered.
41. This history will, of course, be subjected to close examination at the trial. The trial judge will face formidable difficulties because the events in issue occurred so long ago and because Mr McCabe received no medical care expressly related to his complaints (apart from relief for his migraines) until March 1994, the month when he was actually dismissed. (He does, however, place reliance on a letter dated 29th June 1993 which suggests that the McCabe family had withdrawn from any social contact "during recent weeks" and that they were "under severe pressure at the moment"). Further difficulties will be created by the fact that Dr Smith wrote in the plural of "the traumatic experiences he has been through since 1993" as having an effect on his condition when she saw him in March 1997, although she identified the single triggering event for his PTSD as:

"the devastating discovery that the allegations of inappropriate sexual behaviour with schoolgirls were not to be thoroughly investigated and instead there was an assumption that he had been guilty."

42. She said that the implications of this for a man who took such pride in his work were obvious, and that his reaction to it was to develop PTSD. If the single triggering event, however, occurred in May 1993, it will be difficult for Mr McCabe to sustain his claim for damages for negligence in its present form, because its viability depends on the defendant's awareness of the severe stress which he did not begin to suffer until after the triggering event had occurred.
43. However that may be, and however difficult it may be to ascertain the facts at this distance of time, I am satisfied that the present condition of the law, as now declared by the House of Lords, demands that the effort be undertaken. If the claim might otherwise be considered viable, it will also be necessary for the trial judge to consider the effect of the recent decision of this court in Hatton v Sutherland [2002] EWCA Civ 76, [2002] 2 All ER 1, which is itself under appeal to the House of Lords. We received no submissions from Mr Mawhinney about the effect of this decision in a suspension (as opposed to an overwork) context, but it would be odd if the law:

(i) permits a claim by an employee known by his employers to be psychologically vulnerable for PTSD arising out of the kind of treatment of which Mr McCabe complains when dismissal was not in contemplation at the time of the triggering event;

(ii) disallows such a claim when the employee was not known to be psychologically vulnerable;

(iii) disallows such a claim by either type of employee (except where embraced in a statutory award for unfair dismissal) if the disciplinary process intended to lead to dismissal was the triggering event.

44. Such oddities are perhaps inevitable when Parliament legislates in one small corner of the employment relationship and leaves the rest to the justice of the common law. The common law, however, thrives on incremental development on a case by case basis, and this is not a case which should be stifled at birth.
45. This short judgment should make it clear that I do not at present understand how Mr McCabe can surmount the hurdle posed by his need to prove, whether in contract or in tort, that his severe psychiatric illness was a reasonably foreseeable consequence of the manner in which he was treated in May 1993. In McLaughlin v Jones [2001] EWCA Civ 1743 at [35] – [47] and [59], [2002] 2 WLR 1274, this court identified the matters which would have to be proved before a client could succeed in recovering damages for psychiatric injury against his solicitor for a breach of duty arising out of the solicitor-client relationship. In Hatton v Sutherland Hale LJ considered issues concerned with foreseeability of psychiatric injury in an employment context at paras 23-31.
46. As I have said, no argument was adduced to us about any of these issues, and the law is still in a state of flux. As the law now stands (or appears to stand) I am very uneasy about the long-term social consequences of a law which may permit an employee who is known to be psychologically vulnerable to recover damages of nearly £200,000 if his or her employer's breach of duty (committed with no thought of dismissal of the employee) triggers off a foreseeable psychiatric injury, while an employee who is perceived to be more robust can recover nothing at all when treated in the same way.

Lord Justice Sedley:

47. An employee may suffer psychiatric trauma by reason of a breach not only of the implied term of good faith but of the implied duty of care. In the present state of the law, if he is so traumatised that he cannot come back to work, there appears still to be no obstacle to the quantification of his loss to include future loss of earnings if the breach was of the duty of care; but if it was a breach of the duty of good faith, it seems that his leaving becomes a constructive dismissal and his loss becomes subsumed in his limited statutory rights.
48. This case is neither of those two. Once the claim is amended as I agree it should be, it is a case in which two arguably distinct things have happened. The claimant has been traumatised by being suspended on a minor and unproven but very distressing accusation; and, much later, he has been dismissed by reason of the same accusation. Johnson v Unisys [2001] ICR 480 without question decides that he cannot bring an action in relation to the latter. It also, I accept, decides that he cannot bring an action in relation to the former if it was simply part of the process of dismissal. But it does not decide that every breach of contract which precedes a dismissal is part of the dismissal.
49. Accordingly, it seems to me, it remains to be decided in the present case whether the act of suspension was (a) wrongful and (b) causative of trauma; and then, if it was both these things, (c) whether it formed part of the process of dismissal or was – as the claimant asserts it was – a discrete event which would have rested where it was but for his own election to appeal against the warning which followed it.
50. The decision of their Lordships' House in Johnson v Unisys has been the subject of academic comment: see the full casenote by Hugh Collins [2001] IJL 305 and the editorial endnote by Mark Freedland; Douglas Brodie, "Legal coherence and the employment revolution" (2001) 117 LQR 604; and the passage on the case in Bob Hepple and Gillian Morris, "The Employment Act 2002 and the crisis of individual employment rights" [2002] ILJ 245, 253-5. It is in no way disrespectful to say that this case illustrates the percipience of Professor Freedland's comment (loc. cit.) that the phoenix of full and fair compensation has risen from the ashes of the common law of wrongful dismissal. It may be, as Professor Brodie remarks (loc. Cit.) that the price of achieving coherence between common law and statute has been the creation of discord with the common law.
51. In this situation I see no offence in our conclusion against the principle established by Johnson v Unisys. This court is after all also bound by its own decision in Gogay v Hertfordshire County Council [2001] IRLR 703, which was cited in Johnson and not disapproved. Whatever our view of the chapter of legal history of which the Industrial Relations Act 1971 formed part (mine, for what it is worth, can be found (1994) 23 ILJ 201, 202-5) we must take from Johnson the Parliamentary intent to curtail the common law where the statutory scheme overlaps it – namely in relation to remedies for dismissal. For the rest the common law remains the responsibility of the courts. There is still no obvious reason, for example, why a suspension or dismissal in clear breach of contract should not in a suitable case be restrained by injunction or struck down as void: see Malloch v Aberdeen Corporation [1971] 1 WLR 1578; Stevenson v United Road Transport Union [1977] ICR 893.
52. I am unable to accept Mr Mawhinney's exegesis of Johnson, that wherever a dismissal eventuates, a common law claim is excluded. Mr Mawhinney himself accepts, rightly, that there must be some causative sequence ending in the dismissal. The employee who is wronged but remains in the job appears still to have a complete cause of action. It will have in due course to be decided whether, for example, an employee who is so distressed by the employer's wrongful act that he leaves, and so may be said to have been constructively dismissed, is bound up in the causal chain. Similarly it will have to be decided in this case whether, if the claimant establishes the facts he has now pleaded, they are subsumed in the dismissal for which he has already recovered such compensation as statute allowed, or whether they constitute a separate and antecedent wrong.
53. If none of this is going to be easy, it is not the fault of the common law. The severance from the body of the common law of dismissal, a common law concept with its own rights and remedies, means that a novel question may arise as to whether earlier events do or do not form part of the dismissal process. For the present it is by no means clear that the suspension of the claimant was sufficiently linked to his eventual dismissal to bar his action, and I agree that the issue, a mixed one of fact and law, should go to trial on a suitable amended pleading.