England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
(Mr. John Leighton Williams Q.C.)
HQ11X02534

		Royal Courts of Justice Strand, London, WC2A 2LL
		10 July 2013

Lord Justice Moore-Bick :

1. Between October 1997 and August 2008 the appellant, Mrs. Suzanne Monk, was employed as an administrative assistant at Cann Hall Primary School in Essex. On 6^th June 2008, following a reorganisation of staffing at the school, Essex County Council ("the Council") wrote to her advising her that the post she occupied would be withdrawn with effect from 31^st August that year and that her employment would therefore cease on that date on the grounds of redundancy.
2. The school term finished on 18^th July 2008 and for all practical purposes that would have been Mrs. Monk's last day at work, although she would have continued to receive her usual salary until 31^st August 2008. However, at a meeting of the school governors during the evening of 9^th July 2008 it was decided that Mrs. Monk should be denied access to the premises immediately. Quite what led to that decision is unclear, but at about 8.30 a.m. the next day the chairman of the governors, Mr. Colin Parsons, went to the school and asked her to leave immediately. She was required to clear her desk and hand over her pass keys before being publicly escorted from the premises by Mr. Parsons, who saw her to her car and watched her leave. Mr. Parsons did not tell her why she was being excluded in this summary manner, beyond saying that it was in the best interests of the school. Mrs. Monk said that she felt humiliated at being treated in front of teachers, children and parents in a way that suggested that she had committed an act of gross misconduct. It is accepted that she suffered a recognised form of psychiatric injury, though whether it was entirely due to the circumstances of her exclusion from the school is in issue.
3. In October 2008 Mrs. Monk made a claim against the Council in the employment tribunal seeking damages for unfair dismissal. The claim was eventually compromised in November 2009 on terms to which it will be necessary to refer a little later. On 8^th July 2009 she began proceedings against the Council, the head teacher and three of the school governors for defamation, alleging that the conduct of Mr. Parson amounted to a statement that she had been guilty of gross misconduct of a kind that justified summary dismissal. However, that claim was also compromised.
4. On 8^th July 2011 Mrs. Monk brought proceedings against the Council in the High Court claiming damages for personal injury caused by the events of 10^th July 2008. At that stage and for some time afterwards both sides were unaware of the decision of the House of Lords in Johnson v Unisys Ltd [2001] UKHL 13, [2003] 1 AC 518, which limits the right of an employee to recover damages for loss caused by the manner of his dismissal. The Council was conscious that Mrs. Monk had been badly treated and on 21^st October 2011 it wrote to her admitting liability but putting in issue causation and the quantum of damage. Statements of case were exchanged and in their defence the Council and the school admitted that

"they, their servants or agents, failed to exercise reasonable care in the manner in which they brought the claimant's employment to an end on 10^th July 2008."

On that basis it did not plead to the factual allegations in the particulars of claim concerning the circumstances surrounding Mrs. Monk's exclusion from the school.

5. The action was set down for trial over three days in a window commencing on 8^th October 2012. However, at some point during the summer the Council became aware of the decision in Johnson v Unisys and by an application dated 17^th July 2012 it applied for permission to withdraw the admissions made in the letter of 21^st October 2011 and paragraph 1 of its defence. It also applied for an order striking out the claim as disclosing no reasonable cause of action.
6. On 12^th September 2012, only a month or so before the date fixed for trial, the application came on for hearing before Mr. John Leighton Williams Q.C. sitting as a Deputy Judge of the Queen's Bench Division. He gave the Council permission to withdraw its admissions on the grounds that they had been made innocently and that the claim ought to be tried on the basis of the legal principles properly applicable to a claim of this kind. Having done so, he ordered that the claim be struck out on the grounds that it could not succeed as a matter of law in the face of the decision in Johnson v Unisys. This is Mrs. Monk's appeal against that decision.

Withdrawal of the admissions

7. On behalf of Mrs. Monk Mr. Keith Morton Q.C. submitted that the judge was wrong to allow the Council to withdraw its admissions for two principal reasons: first, because it was unnecessary and inappropriate for it to do so merely in order to raise the Johnson point; and second, because, in the light of the way in which the proceedings before the employment tribunal had been conducted and eventually compromised, it would be unconscionable for it to do so.
8. As to the first of those submissions, I can see some force, given the proximity of the trial, in the argument that the Council ought not to have been allowed to withdraw the admission in paragraph 1 of its defence. Up to that point it had not sought to contest the allegations made in paragraphs 1 - 29 of the particulars of claim, which, if put in issue, Mrs. Monk would have to prove in the usual way. It would have been important to discover the nature of the case the Council wished to advance and what sort of evidence it intended to call. Its change of position might well have required the preparation and exchange of witnesses statements and other steps which would have caused Mrs. Monk to incur additional expense and would probably have jeopardised the trial date. In the ordinary way considerations of that kind are likely to play a large part in the court's decision, but they did not play any part in the judge's decision in this case because the Council did not suggest that it wished to contest the case on the facts. Its only concern was to clear the way to raising the Johnson point, which, as the judge recognised, was a point of law. The application to withdraw the admissions was made on the assumption that while they stood they precluded, or might preclude, the Council from relying on the Johnson point.
9. When giving permission to appeal, however, Sir Richard Buxton expressed the view that the Council's application to withdraw its admissions had been misconceived. In his view the admission that there had been a failure to exercise reasonable care was no more than an admission of fact and what mattered was whether the facts set out in the particulars of claim were sufficient to amount to a cause of action. That observation led in due course to an application by Mrs. Monk for permission to amend her grounds of appeal to contend that the judge was wrong for that additional reason to allow the admissions to be withdrawn.
10. I respectfully agree with Sir Richard Buxton that the admission in paragraph 1 of the defence was no more than an admission of fact and that since the Council did not intend to dispute the allegations of fact contained in paragraphs 1 – 29 of the particulars of claim, the application to withdraw it was misconceived. However, the admission in the letter of 21^st October 2011 went rather further, because by admitting a breach of duty the Council necessarily admitted the existence of a legal duty of care. Whether at trial it could be held to an admission of that kind made in correspondence might depend very much on what effect, if any, it had had on the course of the proceedings, but it is unnecessary to consider that question because it has since been overtaken by events. The real question facing the judge was whether the Council should be allowed to take the Johnson point at all at that stage in the proceedings. It is to that question that Mr. Morton's second submission is directed.
11. On 22^nd October 2009 the Council served amended grounds of resistance in the proceedings before the employment tribunal, in which it made no admission as to the cause or causes, nature or extent of any psychiatric harm which Mrs. Monk said she had suffered as a result of her exclusion from the school premises on 10^th July 2008. The proceedings were settled shortly afterwards in early November 2009 by a compromise agreement, under which the Council paid Mrs. Monk a sum of money in satisfaction of various claims, including a claim for loss of earnings for the period 1^st September 2008 to 22^nd October 2010. However, the agreement expressly excluded from its ambit the claim for damages for personal injury which she had already indicated that she intended to make, as well as her claim for defamation.
12. Mr. Morton submitted that the damage to Mrs. Monk's health had prevented her from obtaining alternative employment and that she therefore had a claim against the Council for loss of earnings extending well beyond the six week period based on simple redundancy and the two year period covered by the compromise of the proceedings in the employment tribunal. Both parties knew that she was pursuing a claim for personal injury, which, if successful, could no doubt be expected to lead to her recovering substantial damages for loss of earnings. He submitted that if the Council had suggested to Mrs. Monk at the time when the settlement of her claim for unfair and wrongful dismissal was being negotiated that she could not pursue a claim for personal injury before the court and that her remedies lay entirely with the employment tribunal, she might well not have agreed to compromise her claim on the same terms. Both parties, he submitted, entered into the compromise agreement in the knowledge that she was making that claim and in the assumption that she had a good, or at least an arguable, cause of action and it was therefore unconscionable for the Council now to argue that she had no cause of action in respect of her psychiatric injury. In support of that submission he drew our attention to the decision in Johnson v Gore Wood [2002] 2 AC 1.
13. I am unable to accept that submission. As must have been known to both parties, the employment tribunal had no jurisdiction to consider a claim for damages for personal injury as such (although when determining the appropriate remedy for unfair or wrongful dismissal it could take account of the effect it had had on her earning capacity). Accordingly, a claim of that kind would have to be pursued by separate proceedings. Against that background the compromise agreement does no more than exclude from its scope her "potential" claim for personal injury. Notwithstanding the context in which it was made, it does not contain any recognition that she has a good cause of action, nor does it limit the arguments which the Council might wish to raise in its defence. It simply preserved her right to pursue such a claim, if she so wished. Moreover, although the Council was clearly aware that Mrs. Monk was pursuing a claim for personal injury, the evidence does not support the conclusion that the agreement rested on a common assumption that she had a good cause of action; and in the absence of such evidence Johnson v Gore Wood does not provide any support for the submission that it would be unconscionable for the Council now to raise the Johnson point. It may be that, if the Council had raised the point in the course of the negotiations, she would have tried to obtain a more generous settlement, but whether that is so and whether the outcome would have been any different is a matter of speculation.
14. In the absence of anything amounting to an estoppel the decision whether to allow the Council to take the Johnson point, whether by withdrawing its admissions or by applying to strike out the claim, involved an exercise of discretion. The judge thought that it would be wrong in all the circumstances to allow the action to proceed on what was likely to be a false basis and I think he was fully entitled to take that view. Since the Council did not wish to take issue with her on the facts, Mrs. Monk was unlikely to suffer any significant prejudice in the preparation of her case for trial that could not be adequately compensated in costs. Although, therefore, the withdrawal of the admission in paragraph 1 of the defence was not strictly necessary, I do not think that the judge's decision to allow it is open to challenge.

Striking out the claim

15. The question that arises on this appeal is whether an employee who suffers personal injury, whether psychiatric or physical, in the course of and as a consequence of dismissal can maintain a claim for damages at common law against his or her employer. In the present case Mrs. Monk alleges that she has suffered psychiatric injury as a result of the way in which she was treated on 10^th July 2008, but similar questions would have arisen if she had suffered physical injury as a result of some negligent act or omission on the part of Mr. Parsons while he was escorting her from the school premises.
16. The judge held that Mrs. Monk's claim could not succeed because it fell within what has become known as the "Johnson exclusion area". He derived the following principles from the decided cases: (i) that damages cannot be recovered at common law for the consequences of the fact or manner of dismissal; (ii) that an employee retains the right to sue at common law for damages for breach of any obligation which exists independently of his right not to be wrongfully or unfairly dismissed; (iii) that the statutory provisions do not prevent a dismissed employee from recovering damages for a tort committed independently of the dismissal. Although the issue concerning the true date of dismissal had been raised in the course of argument below, no application to amend the particulars of claim had been made. The judge therefore decided the matter on the basis that Mrs. Monk had been dismissed on 10^th July 2008, as alleged in her statement of case.
17. Lord Faulks Q.C., for the Council submitted that in this case any injury suffered by Mrs. Monk had resulted from the manner of her dismissal and that her claim therefore fell squarely within the scope of the Johnson exclusion area. He recognised that it might appear anomalous for an employee to be prevented from recovering damages for personal injury suffered in the course of dismissal, but submitted that in this case any psychiatric harm suffered by Mrs. Monk resulted solely from the manner of her exclusion from her place of employment. Any right to recover damages was therefore precluded by the decisions in Johnson v Unisys and subsequent authorities. He accepted that, if the exclusion of Mrs. Monk from the school did not terminate her employment, the authorities would not prevent her from pursuing a claim because her cause of action would have arisen independently of her dismissal, but he submitted that such an argument had no real prospect of success and resisted any attempt to amend the particulars of claim in order to raise it.
18. Mr. Morton submitted that the way in which Mr. Parsons acted on 10^th July 2008 was not to be viewed as an integral part of Mrs. Monk's dismissal, which in any event occurred not on that occasion but on 31^st August 2008, when the notice terminating her employment took effect. He applied for permission to amend the particulars of claim in order to raise that point.
19. In order to understand the way in which the law has developed in this area it is necessary to go back to the decision in Addis v Gramophone Co. Ltd [1909] AC 488, which is analysed in some detail by Lord Steyn in Johnson v Unisys. The claimant in that case had been summarily dismissed by his employer in a manner which adversely affected his reputation and made it difficult for him to find alternative employment. He brought a claim for damages for breach of contract and was awarded a sum which exceeded his loss of earnings during the period for which he would have been entitled under his contract to continue in his post. The House of Lords held that he could not recover more in an action for breach of contract than his loss of earnings for the period in question and, in particular, that he could not recover additional damages for injured feelings or for any loss he might have suffered from the fact that the manner of his dismissal made it more difficult for him to obtain fresh employment. The decision is authority for the proposition that injury to feelings and damage to employment prospects are not recoverable heads of damage in an action for wrongful dismissal, but it does not support the conclusion that the employee is unable to sue on any other recognised cause of action, as Lord Atkinson expressly recognised at page 496. It was not suggested, therefore, that Mrs. Monk could not bring a claim for defamation, as she did, based on the manner of her exclusion from the school.
20. It might have been thought that, although injury to feelings and future employment prospects was not a recoverable head of damages in an action for wrongful dismissal, the decision in Addis v Gramophone Co allowed an employee to recover damages for personal injury resulting from breach of the ordinary common law duty of care, but the decision in Johnson v Unisys shows that that is not the case. In that case the claimant, who had been summarily dismissed without being given an opportunity to answer the criticisms made of him and in breach of the employer's disciplinary procedures, sought to avoid the operation of Addis v Gramophone Co by claiming damages for breach of the implied term of trust and confidence in his contract of employment. He also made a claim in tort for damages caused by negligence on the part of his employer in the manner of his dismissal. His case was that the fact and manner of his dismissal had caused him to suffer a mental breakdown which had prevented him from obtaining further employment. The House of Lords held that under Part X of the Employment Rights Act 1996 Parliament had provided the employee with a limited remedy for the conduct of which he complained and that it would be an improper exercise of the judicial function for it to fashion a remedy at common law in the light of the evident intention of Parliament that such claims should be heard by specialist tribunals and the remedy restricted in application and extent. Lord Hoffmann, with whom Lord Bingham, Lord Nicholls and Lord Millett agreed, expressly held that, although in general a duty of care could exist independently of the contractual relationship, the grounds upon which it would be wrong to impose an implied contractual duty on the employer would make it equally wrong to achieve the same result by the imposition of a duty of care.
21. In Eastwood v Magnox Electric Plc, McCabe v Cornwall County Council [2004] UKHL 35, [2005] 1 AC 503, however, the House drew a clear distinction between claims accruing at common law before dismissal and claims based on the dismissal itself, holding that the former could be pursued in the ordinary way. In the light of that decision Mr. Morton submitted that whatever may have been in the parties' minds on 10^th July 2008, the exclusion of Mrs. Monk from the school on that occasion did not amount to summary dismissal.
22. Although the decision in Johnson v Unisys establishes that the employer owes no duty at common law to take reasonable care to avoid causing harm to the employee by dismissing him unfairly or wrongly, it does not follow that the employer is entirely free of any duty of care arising in relation to dismissal. In Edwards v Chesterfield Royal Hospital NHS Foundation Trust [2011] UKSC 58, [2012] A.C. 2 A.C. 22 Lord Dyson observed at paragraph 52:

"The unfair dismissal legislation occupies the unfair dismissal territory to the exclusion of the common law, but it does not impinge on any cause of action which is independent of a dismissal (such as a common law claim for damages for suspension in breach of contract)."

Lord Dyson there had in mind the decision of the House of Lords in Eastwood v Magnox, but his comment identifies the essence of the distinction between cases that fall within the Johnson exclusion area, which is concerned with the dismissal itself, and those which fall outside it. Only claims which are independent of the dismissal can properly be said to fall outside the exclusion area. Whether a claim for physical injury caused negligently in the course of escorting Mrs. Monk from the premises would be regarded as independent of the dismissal for these purposes is a nice question. Lord Faulks was inclined to accept that it would, but it is unnecessary to express any concluded opinion on the point.

23. The notice terminating Mrs. Monk's employment expired on 31^st August 2008, but that did not prevent the Council summarily dismissing her in the meantime: see Stapp v The Shaftesbury Society [1982] IRLR 326. If her exclusion from the school on 10^th July 2008, on which her claim was originally based, constituted her dismissal, the manner in which it was carried out was probably too closely related to the dismissal itself to escape the Johnson exclusion area, although it is unnecessary to reach a final decision on that point for the purposes of this appeal. If, on the other hand, it was nothing more than an incident occurring during the period of her employment, which terminated on 31^st August 2008, it is difficult to see how it could have been sufficiently closely related to the dismissal to fall within the Johnson exclusion area.
24. Although at the hearing before the judge it was argued that Mrs. Monk's employment did not in fact come to an end until 31^st August 2008, he found it unnecessary to decide the point because there was no application before him to amend the particulars of claim. In those circumstances he contented himself with expressing the view that on the evidence before him he considered the argument had a minimal chance of success. Lord Faulks submitted that Mrs. Monk should not be allowed to amend her case at this stage of the proceedings because to do so would amount to an abuse of process, given that she had pursued proceedings before the employment tribunal on the basis that she had been dismissed on 10^th July 2008 and had received a substantial sum of money under a compromise of that claim. Following the compromise the claim was withdrawn by Mrs. Monk and formally dismissed by the tribunal as a result.
25. The judgment of the employment tribunal gives rise to a cause of action estoppel between the parties (see Barber v Staffordshire County Council [1996] 2 All E. R. 748), but it is limited to claims for unfair and wrongful dismissal. It does not, in my view, give rise to an issue estoppel of any kind. The tribunal was not required to reach a decision on any of the issues between the parties; its decision was based on the withdrawal of the claim pursuant to the compromise. However, it remains the case that Mrs. Monk is now seeking to pursue a different claim on a different basis and it is that which is said to constitute an abuse of process.
26. Before the employment tribunal it was a matter of little significance whether Mrs. Monk's employment had come to an end on 10^th July or 31^st August 2008. In substance her claim was for unfair dismissal based on the decision to make her redundant. Her salary was paid up to and including 31^st August 2008 and therefore if her employment was terminated on 10^th July she suffered no loss of earnings. I can understand why Mrs. Monk and those advising her should have assumed that the dramatic events of 10^th July 2008 amounted to summary dismissal, but to determine the true position requires a proper investigation of the surrounding circumstances and the application of principles of law. At the time the claim before the employment tribunal was compromised neither side was aware of Johnson v Unisys and both appear to have assumed that the claim for personal injury would proceed in the usual way. It is only the discovery by the Council of the Johnson exclusion area that makes it necessary for Mrs. Monk to argue by way of riposte that she continued to be employed until 31^st August 2008. The date at which her employment ceased was not the basis of the settlement agreement and she obtained nothing under it that depended on her having been dismissed on 10^th July 2008. In those circumstances I do not think that the Council can claim to be prejudiced by her change of position. I am not persuaded, therefore, that it would be an abuse of process for her to contend that her employment came to an end on 31^st August rather than 10^th July 2008.
27. The judge was not impressed by the merits of the argument, but he did not need to consider them once he had decided that he was bound to confine himself to the allegations in the statements of case. However, the terms of the letter of 6^th June 2008 and other contemporaneous correspondence, the fact that the Council has asserted that it did not intend to dismiss her on 10^th July and the fact that it continued to pay Mrs. Monk her salary until 31^st August 2008 (as well as her redundancy pay) all point strongly to the conclusion that her contract of employment continued until that date. Before deciding exactly when and how it was brought to an end it will be necessary for the court to consider the evidence as a whole, with particular reference to what happened on 9^th and 10^th July 2008. I do not think that it is possible at this stage to be confident that, if she were given permission to amend to raise the point, it would necessarily fail.
28. Finally, Lord Faulks submitted that the operation of the common law rules on remoteness of damage meant that Mrs. Monk's claim had no real prospect of success and should be struck out on that ground alone. As it stands at present the Council's defence is very spare. It has not pleaded to paragraphs 1- 29 of the particulars of claim, which contain the allegations relating to the circumstances in which the injury occurred, and merely puts her to proof that she has suffered personal injury, loss and damage. Similarly, in its statement of case it challenges the medical evidence on which she relies in support of her claim, but puts forward no positive case in answer to it, although it has since served its own medical report.
29. The argument that the loss in this case is too remote in law to be recoverable turns on the extent to which, if at all, the Council could reasonably have foreseen that Mrs. Monk might suffer psychiatric harm of some kind because of the way in which she was treated. It was touched on briefly in the judgment below, but was not decided, perhaps because it was not an issue on the pleadings as they then stood. In my view it represents an attempt to take advantage of a line of argument that was raised in Johnson v Unisys, but which did not form the basis of the decision in that case. The application in this case was to strike out the claim because it disclosed no reasonable grounds for bringing it; or, as it is put in the supporting witness statement of the Council's solicitor, that the particulars of claim disclosed no cause of action. No attempt was made at that stage to assert that the claim was bound to fail because the loss was too remote, an argument that would depend in part on an evaluation of the evidence. In those circumstances, although I can see some force in the Council's argument, I think it would be wrong to strike out the claim on this ground when the issue has not been properly raised or argued.
30. In my view the judge was wrong to stick rigidly to the pleadings, despite the fact that counsel had not made an application to amend. The point had been raised in argument and he should have allowed Mrs. Monk to rely on it, provided she was willing to amend her particulars of claim accordingly. For those reasons I would give Mrs. Monk permission to amend her particulars of claim in order to contend that her contract of employment was terminated on 31^st August 2008 and would allow the appeal.

Lord Justice Sullivan :

31. I agree.

Lord Justice Underhill :

32. I agree that Mrs Monk should be given permission to amend her particulars of claim and that this appeal should be allowed for the reasons given by Moore-Bick LJ. For myself, I am far from sure that even if the court were to conclude that she was dismissed, apparently by conduct, on 10^th July her claim would fall within the Johnson exclusion area. I accept that on that hypothesis the conduct of which she complains as giving rise to a cause of action in negligence – broadly, Mr Parsons' conduct in marching her off the premises – would be the same as that which constituted the dismissal, but I would nevertheless think it very arguable that it remained "independent" of the dismissal in the sense in which that term is used in Eastwood and in Edwards: despite the factual overlap she would not be bringing a claim that she had been dismissed unfairly. But I need not express a concluded view, and it is perhaps better not to do so in circumstances where the facts have not been found. The point will in any event be academic if, as I suspect may well be the case, it is held in the end that the events of 10^th July amounted to no more than Mrs Monk being told that she need not work for the remainder of her notice period and did not give rise to a dismissal.