England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE EMPLOYMENT APPEAL TRIBUNAL
(His Honour Judge Peter Clark presiding)

		Royal Courts of Justice Strand, London, WC2A 2LL
		30/01/2008

Lord Justice Rimer :

Introduction

1. This is an appeal against an order dated 13 June 2007 of the Employment Appeal Tribunal (His Honour Judge Peter Clark, Mr D. J. Jenkins OBE and Mr M. Worthington, "the EAT") upholding a decision of the Employment Tribunal (Chairman, Ms S.E. Gilbert, "the ET") promulgated with reasons on 28 December 2006. The claim was by Mrs Gillian Triggs against her former employer, GAB Robins (UK) Limited. It was for compensation for constructive unfair dismissal. The ET upheld her claim and directed themselves as to the basis upon which her compensation was to be assessed. The assessment was to be conducted at a separate remedy hearing.
2. The employer appealed to the EAT against both the decision that Mrs Triggs had been constructively unfairly dismissed and the ET's directions as to remedy. There is no further appeal to this court against the upholding by the EAT of the decision that Mrs Triggs was constructively unfairly dismissed. The employer's appeal, brought with the permission of the EAT, is solely against the upholding of the ET's remedy directions. The remedy hearing took place on 12 October 2007, with reasons promulgated on 18 October 2007, and we also have the benefit of those reasons.
3. The issue is ultimately a short one. The employer's case, presented to us by Mr Andrew Clarke QC leading Mr Gary Self, is that the ET misdirected themselves in holding that, in assessing Mrs Triggs's entitlement to compensation for the loss she sustained in consequence of the dismissal, account could and should be taken of the loss flowing from the employer's injurious, repudiatory conduct towards Mrs Triggs which she accepted so as to effect the dismissal in respect of which she brought her claim. That conduct had caused her to become ill, following which she left work and was on sick pay for part of the time leading up to the eventual dismissal. The employer's submission was that it was not open to the ET, in assessing compensation for her unfair dismissal, to have regard to that pre-dismissal conduct: the assessment must be confined to compensating her for the loss sustained by the dismissal itself, namely (in this case) compensating an employee who at the time of dismissal was already ill and on sick pay, being pay in respect of which her rights were shortly to be exhausted. The contrary argument of Ms Ingrid Simler QC, leading Ms Sarah Stanzel, for Mrs Triggs was that the ET directed themselves correctly as to the recoverable compensation and conducted the remedy hearing in accordance with those directions.
4. In deciding between the rival arguments, I will (i) summarise the facts, which I take from the judgment of the EAT; (ii) set out the relevant statutory provisions; (iii) refer to the ET's directions as to the assessment of compensation; and (iv) consider the correctness of those directions as a matter of principle.

The facts

5. The employer carries on business nationwide as chartered loss adjusters. Mrs Triggs commenced working for them at their Romford office on 6 September 1999. During the material time, she worked as a secretary/personal assistant to two investigators, Mr Carter and Mr Woffindin. She was a conscientious and loyal employee, who shouldered an excessive workload and put in long hours without extra pay in order to provide the necessary support to the two investigators. From about April 2001 Mr Carter raised with his manager, Mr Baldock, the problem of her workload. On 6 August 2003 Mrs Triggs collapsed at home, following which she was signed off work for a week with stress. Although the two investigators continued to raise the matter of her workload with Mr Baldock, she remained overworked. In addition, she found Mr Baldock's treatment of her such as to amount to bullying (the ET gave an example at [22] and [23] of their judgment).
6. On 30 September 2004 Mrs Triggs returned to work after two days' sick leave and had to suffer Mr Baldock shouting at her down the telephone. She decided she had had enough. She left the office that morning, never to return. Her doctor signed her off sick with stress and depression, later diagnosed as anxiety and depression. No-one from senior management contacted her. She became frightened to go out alone and spent time at home sobbing uncontrollably and sleeping for long periods.
7. On 19 October 2004 Mrs Triggs's HR manager, Angela Munn, wrote to her, informing her that as from 18 October she would only receive statutory sick pay. That decision was rescinded on 29 October, when Ms Munn wrote again to Mrs Triggs informing her that, in the exercise of its discretion, the employer would pay her full pay until 5 November.
8. On 20 December Mrs Triggs wrote a letter to Mr Latimer, a director, raising two matters by way of a grievance: (i) her alleged long term bullying by Mr Baldock, and (ii) her overwork. As to the latter, she estimated that over the previous three years she had put in 15 to 20 hours a week over and above her paid hours. She received no reply and sent a reminder on 17 January 2005. That provoked a response from Ms Munn the following day in which she raised two issues only, that of sick pay and Mrs Triggs's relationship with Mr Baldock. She ignored the problem of Mrs Triggs's workload.
9. A meeting was then arranged at Mrs Triggs's home on 26 January 2005, attended by Mrs Triggs, Mr Carter, Mr Latimer and Ms Munn. The ET found that it lasted two hours, during which Mrs Triggs outlined the history of her complaints of overwork and working under pressure, including increased pressure from Mr Baldock, which continued even after she had collapsed in August 2003. The ET found the meeting to have been an ordeal for her: she trembled throughout it and was clearly unwell, as was confirmed in an email that Ms Munn later sent to Mr Hessey, the group HR manager. Ms Munn followed the meeting with a letter of 9 February to Mrs Triggs. She proposed that Mrs Triggs would receive half pay from 5 November 2004 to 28 February 2005, and statutory sick pay of £66.15 a week from 1 March. As for the complaint against Mr Baldock, she wrote that she had investigated it and had spoken to Mr Baldock, whose account differed from Mrs Triggs's. She proposed that, before returning to work, Mrs Triggs should have an informal meeting with Mr Latimer, Mr Baldock and herself with a view to trying to resolve the differences. Mrs Triggs's response on 15 February thanked Ms Munn for the sick pay offer but complained that the employer appeared to have ignored the grievance raised in her letter of 20 December 2004 with regard to Mr Baldock. She said (in effect) that the proposed meeting offered no satisfactory solution and that she "… would find this extremely difficult as John Baldock has now placed me under his direct control and I find this intimidating." She said she had therefore decided to terminate her contract of employment and was proposing to seek legal advice as to her remedies against the employer.
10. Mrs Triggs's letter of 15 February 2005 amounted to her acceptance of what the ET found to have been a breach by the employer of its implied duty of trust of confidence owed to her as an employee, such breach being of its nature a repudiatory breach of the employment contract. It was that acceptance that marked the termination of the contract by constructive dismissal. The effective date of termination of her employment for the purposes of section 97 of the Employment Rights Act 1996 ("the ERA") was agreed to be 15 March 2005.

The statutory provisions

11. Section 94 of the ERA confers a right upon an employee not to be unfairly dismissed. By section 95 dismissal includes the case in which the employer terminates the employment contract with or without notice to the employee; and, more relevantly, the case in which "the employee terminates the contract under which he is employed (with or without notice) in circumstances in which he is entitled to terminate it without notice by reason of the employer's conduct". The latter case is ordinarily referred to as constructive dismissal, which was the nature of Mrs Triggs's dismissal.
12. Employment tribunals have an exclusive jurisdiction to hear and adjudicate upon claims for unfair dismissal. No such claim can be brought before the ordinary civil courts, although claims for wrongful dismissal (dismissal in breach of the terms of the employment contract) can of course be so brought. A successful claim before a tribunal for unfair dismissal entitles the employee to a basic award and a compensatory award (section 118 of the ERA). The former is a matter of arithmetical calculation. Subject to a statutory cap on the maximum award, the assessment of the latter is governed by section 123 of the ERA. Section 123(1) provides:

"Subject to the provisions of this section and sections 124, 124A and 126, the amount of the compensatory award shall be 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."

13. Section 123 then sets out various explanatory and qualifying provisions which it is unnecessary to describe. The section applies both to actual and constructive dismissals.

The ET's directions as to the assessment of compensation

14. Having held that Mrs Triggs had been unfairly constructively dismissed, the ET dealt with the question of remedy in [58] to [67] of their judgment. They referred to sections 118 and 123 of the ERA and correctly directed themselves, in [59], that what they had to decide was whether Mrs Triggs's "loss of earnings following on from her resignation on 15 February 2005 to take effect on 14 March 2005 were a consequence of her dismissal and if they were, was the loss attributable to action taken by the employer." In [60] they said she could not recover compensation in respect of wages not received during the period prior to the dismissal. Thus she could not recover in respect of wages not received during the period from September 2004 to 14 March 2005, although they held that compensation in respect of such lost wages might be recoverable as damages in a personal injury claim brought in the ordinary civil courts. They had in mind that Mrs Triggs might have a separate common law claim against the employer for breach of the implied term of trust and confidence that had caused her illness and resulted in her failure to continue to receive the wages she would otherwise have received during that period.
15. The ET then said, in [61] and [62], that nor can a claimant in unfair dismissal proceedings recover compensation for injury to feelings or pain and suffering. Again, compensation of that sort might be recoverable in a common law claim for personal injury; and they said that, were Mrs Triggs to bring such a claim, she would have to give credit in it for any compensation for lost earnings that she had earlier recovered in her unfair dismissal claim. No criticism was levelled on this appeal at any of that.
16. The ET then focused on what they were concerned with, which they explained, together with their conclusions, as follows:

"63. … We are here concerned with the compensation [Mrs Triggs] can recover as a consequence of her acceptance on 15 February 2005 of the Respondent's breach of the implied term of trust and confidence as a repudiation of her contract of employment with effect from 14 March 2005.

64. As a consequence of [Mrs Triggs] accepting the cumulative breaches as repudiatory, [Mrs Triggs] lost her ability to exercise her rights under the contract of employment and thereby an ability to continue to consult and agree with the Respondent any exercise of its discretion on whether or not to pay her sick pay and if so, at what rate. [Mrs Triggs] also by accepting the Respondent's breaches as repudiating the contract accepted it was no longer possible for her outstanding grievances to be resolved and that she could not return to work for the Respondent.

65. Having resigned in response to the Respondent's conduct which was no longer capable of resolution under the terms of the contract of employment, [Mrs Triggs's] loss thereafter flows from the dismissal. The Tribunal has found that [Mrs Triggs] became ill as a result of the Respondent's conduct and in those circumstances it matters not that by the time of the dismissal [Mrs Triggs] was in receipt of only statutory sick pay from her employer. She is entitled to recover the loss of her salary flowing from her dismissal at the full rate for such period as the Tribunal determines at the adjourned hearing with the Tribunal taking account of such payments [Mrs Triggs] has received since that time it considers it is required to do. In deciding what is a reasonable period for [Mrs Triggs] to recover compensation for, the Tribunal will have to have regard to what period of [Mrs Triggs's] ill-health is attributable to the Respondent's conduct."

17. The ET said, at [67], that in reaching their conclusions they had "had regard" to five named authorities to which they had been referred. They did not, however, explain what principles they had derived from them.
18. Those directions were upheld by the EAT by their judgment delivered on 13 June 2007. The remedy hearing itself took place on 12 October 2007, followed by the ET's reasoned judgment for its award promulgated on 18 October 2007. The ET made a basic award of £2,100 and a compensatory award of £58,400. That decision is not formally before us (although I presume it is the subject of an appeal to the EAT), but we were shown the ET's reasons for it, which Mr Clarke said showed that the ET had remained in error as to the correct approach and which Ms Simler sought to defend. The ET approached the assessment of the compensatory award on the basis that Mrs Triggs's stress-related illness had been caused by the employer. They rejected the employer's argument that she would have been dismissed anyway after she had exhausted her statutory sick pay entitlement. They found, at [27], that there was an 80% likelihood that she "would have either never been off sick or would have returned to work if the Respondent had handled the matter better." The ET had earlier said, at [19] and [21], that:

"If [Mrs Triggs's] concerns about her treatment at work had been properly investigated from the outset and indeed if her grievance submitted in December 2004 had been properly investigated as Mr Hessey told the Tribunal it would have been had he been employed at the time, the grievance may have been resolved to the satisfaction of [Mrs Triggs] in a way she would either not have become ill or if she had become ill been able to recover and carry on working. … Why should a Claimant not be able to recover compensation for her loss of income post dismissal where her loss of income pre and post dismissal in [sic] attributable to the Respondents conduct. The compensation is not for the illness it is for the loss post dismissal which is attributable to the Respondents conduct."

19. Speaking for myself, I have some instinctive sympathy for that approach to the assessment of Mrs Triggs's loss. It was that the employer's breach of duty towards her in the long run-up to the dismissal had caused her to become ill and to diminish her earning capacity; and that the loss she had suffered following her dismissal ought therefore to include loss suffered in consequence of that reduced income-earning capacity when it had been caused by the employer in circumstances resulting in that dismissal. More shortly, the ET's approach was that the loss suffered by Mrs Triggs "in consequence of the dismissal" (section 123) included loss consequential upon the antecedent breaches by the employer of the implied term of trust and confidence that had amounted to the repudiatory breach of the employment contract which Mrs Triggs accepted on 15 February 2005 so as to effect the dismissal on 15 March 2005.
20. Sympathy cannot, however, be allowed to get in the way of principle; and Mr Clarke's submission was that the ET's approach was wrong in principle and cannot be reconciled with the guidance provided by the House of Lords in Eastwood and another v. Magnox Electric plc; McCabe v. Cornwall County Council and others [2004] IRLR 733 ("Eastwood"), which was one of the five authorities to which the ET were referred. The point, in short, was that loss of the type identified by the ET did not flow from the dismissal, which happened in March 2005. In so far as it was caused by the employer, it was caused by the employer's antecedent breaches of the implied term of trust and confidence, being breaches which, by the time of the dismissal, had already caused Mrs Triggs to become ill and so impaired her earning capacity. Mr Clarke accepted that she might have a separate common law remedy in respect of the damage so caused (including her reduced income-earning capacity); and we were told that Mrs Triggs has issued a claim form for such a remedy. But it was not recoverable as compensation in an unfair dismissal claim before an employment tribunal.

Were the ET's directions correct in principle?

21. The answer to this question is, I consider, provided by the guidance in Eastwood. But the relevant story starts with Johnson v. Unisys Ltd [2001] IRLR 279 ("Johnson"), a decision of the House of Lords dealing with the interface between (i) claims by an employee for damages at common law for breaches by his employer of terms of the employment contract (including for wrongful dismissal) and (ii) claims by an employee for statutory compensation under the ERA for unfair dismissal. Johnson set the scene for the issues raised by Eastwood and so I will first explain the decision in Johnson.
22. Mr Johnson was summarily dismissed by Unisys for an alleged irregularity. He brought a claim before an employment tribunal for unfair dismissal and was awarded total compensation of just under £11,700. Some years later he brought a claim in the county court for substantial damages at common law for breach of contract, alternatively negligence. The contract claim was for breach of (inter alia) the implied term of trust and confidence owed to him by his employer. The breach was alleged to lie in the manner of his dismissal, being one allegedly effected without a fair hearing and in disregard of disciplinary procedures. This was said to have caused Mr Johnson a mental breakdown that made it impossible for him to find work.
23. The circuit judge struck the claim out, a decision that was upheld by this court and the House of Lords. Although Lord Steyn concurred in the result, his reasoning amounted to a dissent on the central questions considered. The leading speech was that of Lord Hoffmann, with which Lord Bingham of Cornhill agreed, as did Lord Millett in the course of a substantive judgment of his own. Lord Nicholls of Birkenhead delivered a short speech in agreement with the main plank of Lord Hoffmann's reasoning.
24. Lord Hoffmann explained that the first question was whether the implied term of trust of confidence owed by an employer to an employee also applied to a dismissal. The problem lay in the fact that the common law entitles an employer to dismiss an employee without giving him a hearing and for unreasonable and capricious motives, and that the employee in such a case has no remedy at common law unless the dismissal is in breach of contract. The consequence is that a common law action for wrongful dismissal can at most yield compensation measured by reference to the salary that should have been paid during the contractual period of notice (see, for example, Malloch v. Aberdeen Corporation [1971] 1 WLR 1578, at 1581, per Lord Reid).
25. Given these considerations, Lord Hoffmann regarded it as difficult to imply into an employment contract a term that the employer should nevertheless not dismiss an employee except for some good cause and only after affording him a reasonable opportunity to show that no such cause existed. He did not, however, regard it as beyond the capacity of the common law to do so, although that would mean overcoming the effect of the decision of the House of Lords in Addis v. Gramophone Co Ltd [1909] AC 488 that an employee cannot recover damages for injured feelings, mental stress or damage to his reputation arising out of the manner of his dismissal. That would in principle present no great difficulty, however, if the claimed damage arose not out of the failure to give proper notice of dismissal but out of the breach of another implied term in the employment contract. Lord Hoffmann doubted, however, whether the implied term of trust and confidence could be invoked for that purpose, since that term was concerned with preserving the continuing relationship between employer and employee and so was inappropriate to be enlisted in connection with the way that relationship is terminated. But he added that this consideration might merely be a matter of words; and that if the courts were to look for an applicable implied term, then a more elegant solution would be to have recourse to a separate such term that the power of dismissal will be exercised fairly and in good faith. For this he drew on McLachlin J's minority view in Wallace v. United Grain Growers Ltd [1997] 152 DLR (4^th) 1, 44-48.
26. Having advanced these various considerations, Lord Hoffmann expressed his view that, although it might be jurisprudentially possible to imply a term into Mr Johnson's employment contract that would afford him a remedy in his claim, it would not necessarily be wise to do so. This was because:

"47 … It is not simply an incremental step from the duty of trust and confidence implied in Malik v. Bank of Credit and Commerce International SA [1997] IRLR 462. The close association between the acts alleged to be in breach of the implied term and the irremovable and lawful fact of dismissal give rise to special problems. So, in Wallace v. United Grain Growers Ltd [1997] 152 DLR (4^th) 1, the majority rejected an implied duty to exercise the power of dismissal in good faith. Iacobucci J said, at p.28, that such a step was better left to the legislature. It would be 'overly intrusive and inconsistent with established principles of employment law.'"

27. Lord Hoffmann then explained the particular difficulties that would arise in the trial of Mr Johnson's claim if the common law were extended to enable his claim to be brought on the basis of the breach of an implied term. He concluded by saying that the question of whether the common law should be so developed was finely balanced.
28. Having said this, Lord Hoffmann then identified another solid reason why Mr Johnson's damages claim could not succeed, based as it was on the manner of his dismissal. That was because the remedy for such a complaint was by way of the new statutory claim for unfair dismissal introduced by the Industrial Relations Act 1971 upon the recommendation in 1968 of the Royal Commission on Trade Unions and Employers' Associations. That jurisdiction, now enacted in Part X of the ERA, is exercised exclusively by employment tribunals. Lord Hoffmann explained that the new system was set up by Parliament to deal with the recognised deficiencies of the law as it stood at the time of Malloch v. Aberdeen Corporation [1971] 1 WLR 1581. As he put it:

"54 …The remedy adopted by Parliament was not to build upon the common law by creating a statutory implied term that the power of dismissal should be exercised fairly or in good faith, leaving the courts to give a remedy on general principles of contractual damages. Instead, it set up an entirely new system outside the ordinary courts, with tribunals staffed by a majority of lay members, applying new statutory concepts and offering statutory remedies. Many of the new rules, such as the exclusion of certain classes of employees and the limit on the amount of the compensatory award, were not based upon any principle which it would have been open to the courts to apply. They were based upon policy and represented an attempt to balance fairness to employees against the general economic interests of the community. And I should imagine that Parliament also had in mind the practical difficulties I have mentioned about causation and proportionality which would arise if the remedy was unlimited. So Parliament adopted the practical solution of giving the tribunals a very broad jurisdiction to award what they considered just and equitable but subject to a limit on the amount."

29. Lord Hoffmann explained, at [55], that all the matters of which Mr Johnson complained were within the jurisdiction of the employment tribunal, his claim being primarily for financial loss flowing from the psychiatric injury that he said was a consequence of the unfair manner of his dismissal. That could form the subject of a compensatory award under section 123 of the ERA. Given that Parliament had provided a remedy in the employment tribunal for exactly the sort of conduct of which he complained, was it appropriate for the courts to develop the common law so as to provide him with a parallel remedy that was not subject to the statutory limit by which a compensatory claim in the employment tribunal was capped? In Lord Hoffmann's opinion, with which the majority agreed, the answer was no.
30. The effect of Johnson was therefore to exclude any recourse to the common law by way of a bid to recover damages in that area of the law which had been exclusively reserved to the unfair dismissal jurisdiction of an employment tribunal. The decision inevitably led to questions as to the precise identification of the relevant boundary line. Those questions were later considered by the House of Lords in Eastwood. The cases there under appeal concerned claimants who had been dismissed by their employers and who had brought successful unfair dismissal claims. They then brought separate common law claims in the civil courts for damages for breach of the implied term of trust and confidence owed to them by their employers, those claims being based on alleged breaches committed during the period leading up to the dismissals. The issue for the House was whether the claims were precluded by the decision in Johnson or whether they should be allowed to proceed. The importance of Eastwood lies in the principles explained by Lord Nicholls of Birkenhead, with whose speech Lord Hoffmann, Lord Rodger of Earlsferry and Lord Brown of Eaton-under-Heywood all agreed. Lord Steyn also agreed as to the disposal of the appeals, but expressed views as to the soundness of Johnson, indicating that a re-examination of the issues by Parliament was needed. Counsel before us did not rely on anything in Lord Steyn's speech.
31. Lord Nicholls rehearsed the development of the law leading up to Johnson, explaining that the development of the common law so as to embrace such a claim had been foreclosed by the introduction of the statutory code relating to unfair dismissal claims. Lord Nicholls pointed out that, as was to be expected, Johnson had given rise to demarcation and other problems. At [27] he embarked upon an identification of the relevant boundary line marking off the so-called "Johnson exclusion area" (cases falling within the exclusive jurisdiction of employment tribunals), which he said was "comparatively straightforward". His further observations, in [27] to [33], are directly in point for present purposes and should be quoted in full:

"27 … An employee's remedy for unfair dismissal, whether actual or constructive, is the remedy provided by statute. 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.

28. In the ordinary course, suspension apart, an employer's failure to act fairly in the steps leading to the 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.

29. 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. In respect of his subsequent dismissal he may of course present a claim to an employment tribunal. If he brings proceedings both in court and before a tribunal he cannot recover any overlapping heads of loss twice over.

30. If identifying the boundary line between the common law rights and the statutory rights is comparatively straightforward, the same cannot be said of the practical consequences of this unusual boundary. Particularly in cases concerning financial loss flowing from psychiatric illnesses, some of the practical consequences are far from straightforward or desirable. The first and obvious drawback is that in such cases the division of remedial jurisdiction between the court and an employment tribunal will lead to duplication of proceedings. In practice there will be cases where the employment tribunal and the court each traverse much of the same ground in deciding the factual issues before them, with attendant waste of resources and costs.

31. 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. In some cases this legalistic distinction may give rise to difficult questions of causation in cases such as those now before the House, where financial loss is claimed as the consequence of psychiatric illness said to have been brought on by the employer's conduct before the employee was dismissed. Judges and tribunals, faced perhaps with conflicting medical evidence, may have to decide whether the fact of dismissal was really the last straw which proved too much for the employee, or whether the onset of the illness occurred even before he was dismissed.

32. The existence of the boundary line produces other strange results. An employer may be better off dismissing an employee than suspending him. A statutory clam for unfair dismissal would be subject to the statutory cap, a common law claim for unfair suspension would not. The decision of the Court of Appeal in Gogay v. Hertfordshire County Council [2000] IRLR 703 is an example of the latter. Likewise, the decision in Johnson's case means that an employee who is psychologically vulnerable is owed no duty of care in respect of his dismissal although, depending on the circumstances, he may be owed a duty of care in respect of his suspension.

33. It goes without saying that an inter-relation between the common law and statute having these awkward and unfortunate consequences is not satisfactory. The difficulties arise principally because of the cap on the amount of compensatory awards for unfair dismissal. Although the cap was raised substantially in 1998, at times tribunals are still precluded from awarding full compensation for a dismissed employee's financial loss. So, understandably, employees and their legal advisers are seeking to side-step the statutory limit by identifying elements in the events preceding dismissal, but leading up to dismissal, which can be used as pegs on which to hang a common law claim for breach of an employer's contractual obligation to act fairly. This situation merits urgent attention by the government and the legislature."

32. All those paragraphs deserve close attention. They provide a lucid drawing of the boundary line between (i) claims falling within the Johnson exclusion area, being claims that lie exclusively before an employment tribunal for compensation for unfair dismissal, and (ii) claims that do not and which may entitle the employee to damages at common law for breach of an implied term of the contract of employment such as the implied term of trust and confidence. The House allowed all the cases under appeal to be pursued in the civil courts, on the basis that the assumed facts constituted causes of action which, if proved, had accrued before the dismissals and entitled the claimants to damages.
33. For present purposes, the context being a claim for constructive unfair dismissal, the key paragraph in Lord Nicholls's speech is [31]. That makes clear the distinction between (i) loss flowing from the dismissal itself, which is within the Johnson exclusion area and is exclusively the province of a claim for unfair dismissal before an employment tribunal; and (ii) loss flowing from the employer's antecedent breaches of the implied term as to trust and confidence, being breaches the acceptance of which constitutes that unfair dismissal, but being loss which falls outside the Johnson exclusion area and can only form the part of a common law claim. It is that distinction upon which Mr Clarke relies in the present appeal. He says that the ET erred in this case by including as loss flowing from the dismissal itself loss which did not so flow at all: it was loss that flowed exclusively from the employer's antecedent breaches, which had been committed before the dismissal in March 2005, and so was only recoverable, if at all, in a common law claim.
34. In my judgment, Mr Clarke's submission is a correct one, which I regard as in line both with general principle and with the guidance provided by Lord Nicholls in Eastwood. To the question whether Mrs Triggs's reduced earning capacity by reason of her illness was a loss suffered by her "in consequence of the dismissal" (section 123), the answer is no. It is correct that the dismissal was a constructive one, that is that it was the result of, and followed upon, her acceptance of the employer's antecedent breaches of the implied term of trust and confidence that had caused her illness and, in turn, her reduced earning capacity. But it is fallacious to regard those antecedent breaches as constituting the dismissal. The dismissal was effected purely and simply by her decision in February 2005 that she wished to discontinue her employment. On a claim for unfair dismissal, that entitled her to compensation for whatever loss flowed from that dismissal. But that loss did not include loss (including future loss) flowing from wrongs already inflicted upon her by the employer's prior conduct: those losses (including any future lost income) were not caused by the dismissal. They were caused by the antecedent breaches of the implied term as to trust and confidence and Mrs Triggs had an already accrued right to sue for damages in respect of them before the dismissal. The ET's error in concluding that it was suffered in consequence of the dismissal was to treat the unfair dismissal claim as, in effect, a claim for damages for the employer's fundamental breach and repudiation of the employment contract that Mrs Triggs had accepted by her decision to leave. But her claim was not such a claim. It was simply a statutory claim for unfair dismissal.
35. Ms Simler accepted that it is only the loss sustained in consequence of the dismissal that is recoverable under section 123. She nevertheless defended the ET's directions as to the assessment of the award. Her submission was that, in a constructive dismissal case in which the employer has engaged in a series of acts amounting to a repudiatory breach which the employee is entitled to accept and so determine the contract, there is still only one fundamental and indivisible breach. It is the acceptance of that breach that constitutes the dismissal. This was not a case, Ms Simler said, in which Mrs Triggs had sought to recover compensation for any antecedent breaches committed by the employer, for example for psychiatric injury flowing from the employer's conduct in breach of the implied term of trust and confidence or for lost earnings during the last period of her employment from 30 September 2004 onwards. She had merely sought to recover, and had recovered, compensation in respect of the loss of earnings flowing from the dismissal on 15 March 2005, a loss that was attributable to the employer's prior conduct in breach of the implied term. In that respect, Ms Simler pointed out that the ET had in terms found that, had the employer not acted in such breach, Mrs Triggs would have remained employed and would have resumed work and the receipt of her full salary either before, or at least within a short period of, February or March 2005. In these circumstances, the ET's award of compensation in respect of Mrs Triggs's reduced salary-earning capacity was properly to be regarded as in the nature of compensation for losses consequential upon dismissal and attributable to the actions of the employer.
36. Valiantly though Ms Simler advanced the argument, I respectfully regard it as unsound. It proceeded on the basis that the employer's antecedent breaches of contract caused damage under various different heads, including (i) psychiatric injury flowing from the bullying, (ii) loss of income during the currency of Mrs Triggs's employment (for the period from 30 September 2004 to 14 March 2005) as a result of the illness that it caused her, and (iii) in further consequence of that illness, a reduction in income-earning capacity after the termination of her employment. The submission was that the acceptance of the employer's repudiatory conduct on 15 February 2005 entitled Mrs Triggs to claim that the head (iii) loss was suffered in consequence of the dismissal and so was recoverable in an unfair dismissal claim. It was conceded that the losses under heads (i) and (ii) were not of a like nature and could not be so recovered.
37. I recognise the difference between these three heads, and follow why it could not rationally be advanced that either of the heads (i) and (ii) losses could be said to flow from the dismissal in March 2005. Equally, however, I regard it as fallacious to regard the head (iii) loss as having so flowed. The reason that Mrs Triggs suffered that loss is because the employer had mistreated her so badly during the currency of her employment that it had made her ill and so reduced her earning capacity. It had thereby inflicted upon her a loss (and a potential for future loss) that she had already suffered by the time she elected to treat that conduct as entitling her to terminate the employment. It was that election that amounted to the dismissal, but her right to sue in respect of that loss had accrued before the dismissal. The loss that she would thereafter suffer by reason of her reduced earning capacity was therefore not caused by, or a consequence of, the dismissal at all. It was caused by the employer's antecedent breaches. In reality, there is, for present purposes, no relevant difference in nature between the three heads of loss that Ms Simler identified.
38. In my judgment, therefore, the ET misdirected themselves as to the assessment of compensation. Their decision was of course upheld by the EAT, the panel being presided over by Judge Clark, a judge of the greatest experience in matters of employment law. On this occasion, however, I respectfully consider that the EAT also misdirected themselves. At [66] Judge Clark recognised that had Mrs Triggs been actually (and unfairly) dismissed by the employer in, say, February 2005, she could not have claimed that the illness that the employer had already caused her had been caused by that dismissal. Judge Clark was there recognising that in such a case she could not have recovered compensation in an unfair dismissal claim for her prospective lost income (ie income lost by reason of her illness). The question, he said, was whether it made a difference that her dismissal was a constructive one. Judge Clark then, at [67] to [71], focused on certain observations by Lord Steyn in Eastwood which criticised the majority reasoning in Johnson, which Judge Clark stated he regarded as misplaced. Judge Clark then came to the nub of his reasoning for upholding the ET's approach, namely that, as section 95 of the ERA shows, a constructive unfair dismissal has two elements to it: repudiatory conduct by the employer and acceptance of it by the employee. In this case the employer's breach caused Mrs Triggs's illness in September 2004, a breach which she accepted in February 2005. The result was that "[s]he falls squarely within the Johnson exclusion area for the purposes of bringing a common law claim based on the Respondent's breach of contract; her remedy lies in a claim for loss of earnings in these unfair dismissal proceedings under Section 123(1)." At [75], Judge Clark explained that by saying that:

"… the course of conduct by the Respondent amounting to a breach of the implied term forms part of the constructive dismissal and that [Mrs Triggs's] ill-health caused by that breach is to be treated as a consequence of the dismissal leading to the loss of earnings which would otherwise have been received at the full rate from the employer, such loss being attributable to action taken by the employer."

39. For reasons I have explained, I respectfully disagree with that reasoning. Whilst the employer's repudiatory conduct is an essential condition of a constructive dismissal, it is not that conduct that effects the dismissal. It is the employee's acceptance of it. Damage caused by that conduct is not damage suffered in consequence of the dismissal. It is damage in respect of which the employee already has an accrued cause of action. Although Judge Clark had earlier, at [60] to [61], referred to Lord Nicholls's observations in [27] to [31] in Eastwood, they thereafter played no part in his consideration of the issue before the EAT. That was, in my view, to disregard the most relevant guidance available. We were referred to the later decision of the EAT (Elias J, the President, presiding) in GMB Trade Union v. Brown UKEAT/0621/06/ZT; UKEAT/0442/06/ZT, in which the judgment was handed down on 16 October 2007. That case also concerned a constructive unfair dismissal and, in particular, whether the loss for which the ET had awarded compensation had all flowed from the dismissal rather than the employer's antecedent breach of contract. The EAT was referred to the EAT's decision in the present case, and counsel for the employer submitted that it was wrongly decided on this issue. The EAT in Brown applied the guidance in Eastwood and reduced the ET's compensation award accordingly. Whilst not in terms saying that the EAT's decision in the present case was in error, it is apparent that Elias J was unclear as to its basis (see [64] and [65] of his judgment). In my judgment the EAT's decision in the present case was in error.
40. I would therefore allow the employer's appeal. If my Lords agree, I presume that the order that we should make in place of the order of the EAT should be a declaratory order making clear the basis on which the assessment exercise should be undertaken. No doubt counsel will be able to agree its form.

Lord Justice Lawrence Collins

41. I agree.

Lord Justice Tuckey

42. I also agree.