Scottish Court of Session Decisions

King (ap) v. University Court of the University of St. Andrews [2002] ScotCS 28 (30th January, 2002)

OUTER HOUSE, COURT OF SESSION
	OPINION OF LADY SMITH in the cause PETER KING, (AP) Pursuer; against UNIVERSITY COURT OF THE UNIVERSITY OF ST ANDREWS Defenders:   ________________

 

 

Pursuer : Napier , Advocate; Balfour & Manson

Defenders: Truscott QC; Simpson & Marwick, W.S.

30 January 2002

Introduction :

1. The pursuer was formerly in the employment of the defenders as Assistant Principal Director of External Relations. In terms of his contract the defenders were entitled : "....for good cause shown to terminate the appointment of the employee by giving three months notice in writing." [Clause 4].
2. By letter dated 5 August 1998, the defenders wrote to the pursuer, giving him notice that his contract of employment was to be terminated on grounds of conduct and capability. In this action the pursuer seeks damages for the loss of salary arising out of the termination of his contract of employment , alleging that the defenders were in breach of contract .
3. Both parties had preliminary pleas but, at procedure roll, the pursuer's counsel intimated that he no longer insisted on his preliminary plea. The defenders' counsel, by agreement between the parties, reserved his position as to the adequacy of the specification of certain of the pursuer's averments and concentrated his attack on the pursuer's case on the question of whether the case on record based on breach by the defenders of an implied duty of trust and confidence [referred to on record as a duty of 'trust and respect'] could ever be relevant standing the decision of the House of Lords in the case of Johnson v Unisys Ltd 2001 ICR 480; 2001 IRLR 279 [HL] .

Facts :

4. Parties were agreed as to various facts pertinent to the issue in respect of which they sought a determination.
5. Prior to the issuing by the defenders of the letter of 5 August, a hearing had taken place for the investigation of certain disciplinary charges against the pursuer. The hearing was on 15 June and 3 August 1998 in front of a Panel which the defenders had appointed for the purpose of investigating the charges and reaching a conclusion as to whether there was good cause for terminating the pursuer's employment. Accordingly, the decision to terminate the pursuer's contract was taken some time after 3 August 1998 but before 5 August 1998.
6. The pursuer appealed. His appeal was rejected by an Appeal Panel on 9 October 1998 and that rejection intimated to him on 13 October 1998.

 

The grounds of action:

7. The pursuer's case on record is twofold. Firstly, he offers to prove that in terminating his contract of employment, the defenders did not have good cause to do so and were, accordingly, in breach of the express terms of Clause 4 of the contract. Secondly, he avers that, in various respects, the defenders breached an implied duty of trust and confidence in the course of their investigation and evaluation of the allegations made against him. He also refers to the duty as being 'to act fairly and reasonably'. In particular, he avers that, in implement of the duty of trust and confidence the defenders were obliged to respect the principles of natural justice. In doing so, he avers, they were obliged to give him a fair opportunity to reply to complaints made against him, to question persons who gave evidence to the Panel that was unfavourable to him, and to appoint an independent and unbiased Panel to hear the complaint. He has averments to the effect that he was not given a proper opportunity to reply to the allegations made against him, he was not allowed to cross examine witnesses, he was not allowed to obtain an extension of the shorthand notes that had been taken at the Panel Hearing for the purposes of his appeal which had the effect of depriving the Appeal Panel of the evidence of important witnesses. It is also part of the pursuer's case that the Principal of the defenders was biased against him both prior to the Panel hearing and in the evidence that he gave before it. Since it was he who appointed the Panel to hear the charges against him, that Panel was not, he alleges, independent.
8. In terms of the present pleadings, the pursuer seeks damages in respect of loss of salary from 5 November 1998 to retirement age. It was, however, acknowledged by his counsel at the opening of the debate that that period was too long. He intimated that he would, in any event, be restricting the claim for damages so as to cover only the period 5 November 1998 to 31^st May 2001. A Minute of Amendment would be lodged in due course for that purpose and possibly also to add further specification to his pleadings. There is no claim for solatium nor is there any attempt to differentiate, for damages purposes, between the two separate cases of breach of contract, namely that based on breach of the express term that the defenders could only dismiss if good cause was shown and that based on breach of the implied term that the defenders were to comply with a duty of trust and respect. It follows that the pursuer's case, so far as breach of the implied term is concerned, appears to be that, if it had not been breached, he would have remained in the defenders' employment. The pleadings do not, at present, expressly articulate such a case and might have been vulnerable to an attack on that matter had the defenders been minded to launch one. The defenders' counsel was, however, clear that the only issue on which a ruling was sought was that of whether or not an implied term that the defenders had a duty of trust and confidence towards the pursuer subsisted during the period of investigation and evaluation founded on in the pleadings.

The defenders' submissions:

9. Counsel for the defenders submitted that the common law applied to the pursuer's contract of employment and thus dismissal with contractual notice terminated the contract lawfully: Graham v Thomson [1822] 1S 343; Mollison v Baillie [1885] 22SLR 595. In the event of gross misconduct, the employer could dismiss without any notice. The present case was, he submitted, an example of a contractual provision that fell somewhere between the two. The employer had to have "good cause" to terminate the contract. He accepted that the pursuer's case was relevant insofar as it sought to prove that the defenders did not in fact have good cause for terminating the pursuer's contract of employment. Beyond that the pursuer could not, however, relevantly go. The implied term founded on by the pursuer did not apply because this case was not concerned with the currency of the contract. Counsel for the defender accepted, however, that such an implied term did exist during the currency of the contract.
10. In further support of his submission that the implied duty of trust and confidence did not apply in this case counsel for the defender relied on the fact that the contract did not make any provision for disciplinary procedures. For authoritative support he referred to the Johnson v Unisys Ltd. In particular he referred to the speech of Lord Hoffman at paragraphs 35, 36, 37, 39, 40, 46, 50, 54, 58, 63 and 66. He submitted that in this case the pursuer was saying that he was entitled to a number of safeguards not provided for by his contract, not recognised at common law and not provided for under statute. The pursuer was in fact seeking to specify a procedure which should have been complied with when his contract did not provide for one.
11. In summary, the defenders' counsel submitted that whilst it might seem unfair to the pursuer to deny him the protections he sought, the House of Lords had made it clear in Johnson v Unisys Ltd that they were not, as a matter of policy, prepared to imply terms into contracts of employment regarding the manner of dismissal. That was what the pursuer was trying to do in this case .

The pursuer's submissions:

12. Counsel for the pursuer submitted, under reference to the case of Malik v BCCI 1997 IRLR 462 [HL] that there is now implied into every contract of employment, a duty of trust and confidence. The widespread implication of that term had transformed contracts of employment over recent years. The term would be regarded as broken if the employer, without reasonable and proper cause, conducted itself in a manner likely to destroy or seriously damage the relationship of trust and confidence: Malik v BCCI per Lord Nicholls at pp.463-4; per Lord Steyn at p.468. Insofar as the decision in Johnson v Unisys Ltd limited its application, it was important to be clear as to the precise circumstances of that case, which were different from the present one.
13. Counsel for the pursuer drew my attention to the fact that in Johnson v Unisys Ltd the contract of employment could be terminated for any reason. In particular, in contrast to the contract in this case, there was no requirement that good cause be shown before the employer had the right to dismiss. The employer there could dismiss without cause on giving due notice. Johnson v Unisys Ltd did not concern the stage at which the employer was considering whether or not to dismiss. That decision had been taken and the claim concerned the manner in which the dismissal was carried out.
14. It was submitted that the circumstances of the present case could readily be distinguished from those in Johnson v Unisys Ltd in respect that the breach of the implied term alleged related to the carrying out of the investigations which preceded the decision to dismiss. It concerned a stage which was preliminary to the decision to dismiss and dismissal would not necessarily follow. If, in a hypothetical case, an employer investigated the question of whether or not there was good cause for dismissal in an outrageous way yet decided not to dismiss, the employee would have a claim for breach of the implied term for any loss suffered, even although he was not dismissed. Reliance was also placed on the case of Gogay v Hertfordshire CC 2000 IRLR 703 ,CA, where the Court of Appeal held that in suspending an employee pending the outcome of an investigation regarding her conduct, the employers had acted in breach of the implied term of the duty of trust and confidence as they had no reasonable grounds for suspending her and had failed to carry out a proper investigation of the circumstances before doing so. The circumstances of the case could be contrasted with those in Hilton v Shiner Ltd - Builders Merchants 2001 IRLR 727 where it was held that the employers were not in breach of the implied duty of trust and confidence when they altered an employee's duties to avoid his handling money because it was plain that they still had sufficient trust and confidence in the employee to continue to employ him and they were fully justified in certain suspicions that he had been dishonest when his duties had involved handling money. However, it was submitted that the case was illustrative of the principle that the implied term applied at the stage when the taking of disciplinary action was being considered and worked through, when no decision to dismiss had yet been taken.
15. There was no reason in principle, counsel for the pursuer submitted, why the duty of trust and confidence should not apply where the employer is at the stage of considering a course of action which could lead to dismissal. Even where the employer is entitled to dismiss, he is not entitled to impose a sanction that is of lesser weight where it is not provided for in the contract: Mackay Decorators [Perth] Ltd v Miller 1998 EAT 782/98, where it was held that an employer who was entitled to dismiss an employee had not been entitled to demote him. Nor, it was submitted, was there any reason in principle why an unrestricted discretion enjoyed by an employer under some term of the contract should not be qualified by an implied term: Hill v General Accident Fire & Life Assurance Corporation Ltd [1998] IRLR 641. He accepted that the implied term imposing the duty of trust and confidence did not operate so as to allow an employee, in the event of breach, to disobey his employer's instructions if he opted to remain in his job: Macari v Celtic Football and Athletic Co Ltd 1999 IRLR 787. That was not, however , the position in the present case as the pursuer did not seek to challenge any instruction given by his employer.
16. Under reference to Article 3 of Condescendence, counsel for the pursuer submitted that in this case there were various aspects to the duty of trust and confidence. All the particulars there specified were, he submitted, aspects of that general duty.
17. In response to the defenders' submissions, counsel for the pursuer submitted that the flaw in their approach was that it was being argued that as soon as dismissal is in issue , the duty of trust and confidence flies off. That, he submitted, is too harsh a view and not supported by what was decided in Johnson v Unisys Ltd. Properly analysed, that decision did not have the effect of qualifying the general application of the duty of trust and confidence throughout the currency of the contract.

Decision :

18. The issue raised at the debate is a sharp one. It essentially concerns the question of whether the decision in Johnson v Unisys Ltd when considered in the light of the facts of this case, has the effect of rendering irrelevant the pursuer's case that the defenders were in breach of the implied term of trust and confidence. The issue that the pursuer seeks to have explored at proof is that of whether in the investigation and evaluation that they applied to the question of whether good cause had been shown for dismissing him, the defenders breached that implied term. The defenders position is, put shortly, that there was no room for the implication of the term once 'charges' were levelled against the pursuer and there was a possibility of dismissal under Clause 4 of the contract.
19. The obligation not to engage in conduct likely to undermine or seriously damage the relationship of confidence and trust which must exist between employer and employee is presumptively present in any contract of employment: Malik v BCCI. As was commented by Lord Nicholls of Birkenhead in Malik at para.13:

"This implied obligation is no more than one particular aspect of the portmanteau, general obligation not to engage in conduct likely to undermine the trust and confidence required if the employment relationship is to continue in the manner the employment contract implicitly envisages."

and at paragraphs 55 and 56:

"The major importance of the implied duty of trust and confidence lies in its impact on the obligations of the employer......And the implied obligation as formulated is apt to cover the great diversity of situations in which a balance has to be struck between an employer's interest in managing his business as he sees fit and the employee's interest in not being unfairly and improperly exploited...... I regard the emergence of the implied obligation of mutual trust and confidence as a sound development."

In Johnson v Unisys Ltd Lord Hoffman, at para.46, commented on the applicability of the implied term of trust and confidence:

"In the way it has always been formulated , it is concerned with preserving the continuing relationship which should subsist between employer and employee."

The desirability and purpose of the implication of the term, which appears to be that of promoting a sound working relationship between employer and employee, is not difficult to comprehend. It is clear, in my view, that the term is to be implied throughout all aspects of the ongoing relationship of employer and employee. As was recognised by the Lord President in Macari v Celtic Football and Athletic Co Ltd:

"........the general tern recognised by the House of Lords is likely to manifest itself in more particular terms , much in the same way as the general duty of care not to injure an employee spawns a multiplicity of more specific duties in particular circumstances."

The question which thus arises for my determination is simply whether the breaches of the implied term that are alleged in this case occurred during that ongoing relationship or not. The decision in Johnson v Unisys Ltd makes it clear that once the decision to dismiss has been taken by an employer, there is no room for implication of the term. At para. 46, under reference to the application of the implied term to the continuing relationship between employer and employee, Lord Hoffmann, continues:

"..it does not seem altogether appropriate for use in connection with the way that the relationship is terminated." and at para.58, he makes it clear that the plaintiff's claim fell to be regarded as a claim in respect of unfair circumstances attending his dismissal. There was no general common law remedy for such unfairness and their Lordships were not minded to construct one. Parliament had provided a remedy for unfair dismissal and it was not for them to, in effect, enlarge it:

"...a common law right embracing the manner in which an employee is dismissed cannot satisfactorily co-exist with the statutory right not to be unfairly dismissed. A newly developed common law right of this nature, covering the same ground as the statutory right, would fly in the face of the limits Parliament has already prescribed ......It would also defeat the intention of Parliament that claims of this nature should be decided by specialist tribunals."

[per Lord Nicholls of Birkenhead at para.2 ].

20. I agree with the submission of Counsel for the pursuer that the circumstances of Johnson's case were markedly different from those of the present case. Mr Johnson was summarily dismissed. In terms of his contract, his employers were entitled to do so. There was no contractual term that dismissal could only be on cause shown. Indeed, the employer was entitled, contractually, to dismiss him without any cause at all. The decision to dismiss was not open to attack and continuation of the employer/employee relationship was not an option that remained open for consideration. What Mr Johnson was seeking was damages [in the sum of £400,000] for psychiatric damage which was said to have flowed from the unfair circumstances in which the dismissal took place. In the present case, however, the pursuer founds on alleged breaches of the implied duty of trust and confidence which occurred before any decision to dismiss had been taken. These breaches occurred, according to the pursuer, at the stage when the employer was considering but had not determined the question of whether it was entitled to dismiss in terms of Clause 4 of the contract. Specifically, they occurred prior to the determination of the question of whether "good cause" had been "shown" for termination of the pursuer's contract of employment.
21. At the stage of consideration of the question of whether good cause for termination had been shown it is only logical, in my view, that the employer would have to have it as much in mind that the employee might remain in his employment as that he might not. Investigation and evaluation of allegations might show that there was no good cause for termination. Even if it did show that there was good cause, consideration would then have to be given to the question of whether, such cause having been shown, the right to dismiss should be exercised. In the event that the result was a decision not to dismiss then the implied duty of trust and confidence would obviously apply to the continuation of the ongoing working relationship between employer and employee. It is hard then to see how and why, bearing in mind the purpose of the implication of the duty, it should be regarded as suspended whilst the employer carries out the critically important task of assessing whether good cause for dismissal has been shown. For an employer to act in breach of that duty during an assessment which has the potential either to reinforce or to terminate the contract of employment would clearly be highly destructive of and damaging to the relationship between them.
22. It is also important to note, in my view, that the wording of Clause 4 is such as to provide that "good cause" must be "shown" before the employer has the right to terminate the contract. The wording used envisages, in my view, that, before it is decided whether good cause exists or not, some sort of hearing will take place during which the case that there is "good cause" for dismissal is presented. It underlines, in my view, that the question of whether or not there is to be a dismissal remains an open one until the "showing" of the alleged "good cause" is complete. Just as the plaintiff in the case of Gogay v Hertfordshire CC was entitled to rely on the implied duty as subsisting during the period between allegations being made against her and the outcome of the formal investigation that then ensued, so is the pursuer entitled in this case, in my view, to rely on the implied duty of trust and confidence having subsisted whilst the investigation procedures were being carried out in this case.
23. Counsel for the pursuer requested that in the event that I determined that the duty of trust and confidence did subsist during the stage of investigation and evaluation, I should indicate the precise content of that duty, under reference to his specific averments in Article 3 of Condescendence. Whilst the specific duties "spawned" from the general one, to use the terminology of the Lord President in Macari v Celtic Football and Athletic Co Ltd, appear to be no more than a matter of the sort of fairness and reasonableness that one might expect to be applied in implement of the duty of trust and confidence, I am hesitant, at this stage, to make any ruling on the matter. The precise content of the duties is something which is, in my view, best left for determination once evidence of the whole facts and circumstances has been heard.
24. In the result, I shall repel the pursuer's first plea in law. Quoad ultra, parties were agreed that I should put the case out By Order for further procedure to be determined, mindful in particular of counsel for the pursuer having indicated that he intends to amend his pleadings in respect of loss and of counsel for the defender having reserved his position as regards the adequacy or otherwise of the specification of the pursuer's pleadings. The case will, accordingly, be out By Order for further procedure to be fixed.