United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR GARY SELF (Of Counsel) Instructed by: Messrs Penningtons Solicitors Da Vinci House Basing View Basingstoke RG21 4EQ
For the Respondent	MS SARAH STANZEL (Of Counsel) Instructed by: Direct Public Access Scheme


 


SUMMARY

UNFAIR DISMISSAL

Constructive dismissal

Compensation

Last straw constructive unfair dismissal. Last straw; employer's failure to deal properly with her grievance – Constructive dismissal made out (see Omilaju); compare Fairbrother [2007] IRLR 462.

Remedy – whether loss of earnings recoverable where ill-health begins prior to EDT in constructive dismissal case based on breach of implied term of trust and confidence by employer. Eastwood considered.


 


HIS HONOUR JUDGE PETER CLARK

1. This is an employer's appeal by GAB Robins (UK) Ltd, the Respondent before the Stratford Employment Tribunal (Chairman: Ms S E Gilbert) against that Employment Tribunal's Judgment, promulgated with Reasons on 28 December 2006, upholding the Claimant, Mrs Triggs' complaint of constructive unfair dismissal and ruling, for the purposes of the remedy hearing listed to be held on 14 June 2007, that she is entitled to recover the loss of her full salary flowing from her dismissal for such period as the Employment Tribunal determines. In this judgment we shall describe the parties as they appeared below.

The Facts

2. The Respondent carries on business nationwide as Chartered Loss Adjustors. The Claimant commenced employment at their Romford office on 6 September 1999; at the effective date of termination (EDT) of her employment, 15 March 2005, she worked as secretary/PA to the 2 investigators at that office, Messrs Carter and Woffindin.
3. From about April 2001 Mr Carter raised with his manager, Mr Baldock, a problem with the excessive workload which the Claimant was shouldering. On 6 August 2003 the Claimant collapsed at home. Her doctor signed her off work for one week with stress. Although Mr Carter and Mr Woffindin continued to raise the matter with Mr Baldock she remained overworked; as a loyal and diligent employee (Reasons, paragraph 13) she did what was required to support the two investigators, putting in long hours without extra pay. An audit report presented in February 2004 identified a need for a nominated assistant to help the Claimant with her workload; none was provided by the Respondent.
4. Coupled with the problem of overwork the Claimant found Mr Baldock's treatment of her such as to amount to bullying. An example is given at paragraphs 22 – 23 of the Reasons; Mr Baldock shouted down the telephone at her.
5. Finally, on 30 September 2004, the Claimant had had enough. She had just returned from 2 days sick leave to receive a telephone call from Mr Baldock. He was shouting down the phone. She left the office that morning, never to return.
6. 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. Finally, on 19 October, the Respondent's HR Manager, Angela Munn wrote to the Claimant about sick pay; from 18 October she would receive Statutory Sick Pay (SSP) only. That decision was later rescinded; on 29 October Ms Munn wrote to the Claimant informing her that the Company would, in the exercise of its discretion, continue her full pay until 5 November.
8. On 20 December the Claimant addressed a written grievance to Trevor Latimer, a director of the Respondent. Her letter raised two matters; the alleged long term bullying by Mr Baldock and her overwork, which she put at 15 – 20 hours per week over and above her paid hours for the past 3 years.
9. She did not receive the favour of a reply and sent a reminder on 17 January 2005. The following day Ms Munn wrote, apologising for the delay in replying. Ms Munn identified 2 issues; payment of company sick-pay and the Claimant's relationship with Mr Baldock. We observe that Ms Munn was there taking an entirely consistent line pursued by the Respondent over the past 3 years of wholly ignoring the problem of the Claimant's excessive workload.
10. A meeting was then arranged to take place at the Claimant's home on 26 January. Present were the Claimant and Mr Carter, Mr Latimer and Ms Munn. The Claimant took notes of the meeting which were before the Employment Tribunal. The Tribunal summarise the meeting at paragraph 43 of their Reasons as follows:

"In the course of the two hour meeting the Claimant outlined the history of her complaint of overwork, working under pressure and increased pressure from Mr Baldock which continued as before even after she had collapsed in August 2003. The meeting was an ordeal for the Claimant who trembled throughout it and was clearly unwell. This was confirmed by Ms Munn in a later e-mail to Mr Hessey."

11. Ms Munn came back to the Claimant by letter dated 9 February. As to sick pay, Ms Munn proposed half pay from 5 November to 28 February 2005, with SSP of £66.15 per week commencing on 1 March. As to the Claimant's complaint against Mr Baldock, Ms Munn said:

"With regards to your working relationship with John Baldock, we have investigated your claims regarding John's behaviour towards you and have spoken to him regarding this. John's account of the situation differs from yours and therefore suggest that prior to your return to work, we perhaps arrange for Trevor, you, John and myself to attend an informal meeting in order to try and resolve your differences. No decision has to be made on this now, but suggest we talk again before you return to work."

12. The Claimant considered that letter and wrote to Ms Munn on 15 February, thanking her for the generous offer of sick pay. She continued:

"However, the fact remains that my ill health is as result of stress caused by unreasonable demands and bullying tactics by John Baldock. My letter of the 20^th December 2004 set out my grievances with the company as my employer, but taking paragraph 5 of your letter it would appear that you have disregarded the grievance issues with John Baldock and the only ending you can offer me is having an informal meeting with Trevor Latimer and John Baldock. I would find this extremely difficult as John Baldock has now placed me under his direct control and I find this intimidating.

Therefore, I have no option but to terminate my contract of employment with you and seek legal advice in bringing an action against the employer for constructive dismissal, unfair dismissal and other remedies I am entitled to under employment law."

The Employment Tribunal Decision

13. As to the disputed issue of constructive dismissal, the Employment Tribunal directed themselves (Reasons paragraph 51) to the well-known test in Western Excavating (ECC) Ltd v Sharp [1978] ICR 221 (CA); identified the implied term of mutual trust and confidence adopted by the House of Lords in Malik v BCCI [1997] IRLR 462 (for a consideration of that formulation see Baldwin v Brighton & Hove City Council [2007] IRLR 232) and finally referred to the 'last straw doctrine' as explained by the Court of Appeal in Lewis v Motor World Garages Ltd [1986] ICR 157 and more recently in London Borough of Waltham Forest v Omilaju [2005] IRLR 35.
14. The Employment Tribunal concluded (Reasons paragraphs 52 - 54):

"52 From the facts the Tribunal found, it is clear the Claimant had too much work. She and others on her behalf raised this at appropriate levels with the Respondent regularly. It is also clear from the facts and (sic) the Claimant was under pressure to manage this workload and this pressure was increased by the way Mr Baldock spoke to her which was not supportive or encouraging but was negative and critical.

53 After a number of "false dawn" she broke down at work and was off sick with stress. All trust and confidence finally broke down when the Respondent quite simply failed to carry out an adequate and proper investigation into her grievances about her workload and the pressure she was under because of it and because of Mr Baldock's manner towards her.

54 The Claimant resigned in response to the Respondent's conduct and its cumulative impact on her. The Respondent knew her situation and did nothing to make it better. The Respondent did without reasonable and proper cause conduct itself in a manner likely to cause the relationship between the Respondent and the Claimant to break down. The Claimant was dismissed. No fair reason has been advanced for her dismissal and her dismissal was unfair. In reaching our conclusions we have had regard to the cases we have been referred to by the parties in addition to those we have already referred to. Woods v W M Car Services (Peterborough) Ltd [1981] IRLR 347, W A Goold (Pearmak) Ltd v McConnell & others [1995] IRLR 516."

15. As to remedy, the Employment Tribunal considered an argument raised by Mr Self on behalf of the Respondent that the Claimant was not entitled to recover any loss of earnings following the constructive dismissal, as found, effective on 15 March 2005. He relied particularly on the House of Lords judgment in Eastwood v Magnox Electric plc (conjoined with the appeal in Cornwall County Court v McCabe) [2004] IRLR 733.
16. The Employment Tribunal rejected that contention for the reasons given at paragraphs 60 – 67 of their Reasons.

The Appeal

17. The Respondent's Notice of Appeal raises 2 grounds:

(a) that the Employment Tribunal took a wrong approach in law to the question as to whether the Respondent was in repudiatory breach of the implied term of trust and confidence by reference to the Respondent's conduct of the Claimant's grievance ("Constructive Dismissal")

(b) that in the light of Eastwood and the Court of Session decision in Dignity Funerals Ltd v Bruce [2005] IRLR 189 the Employment Tribunal erred in finding that the Claimant had suffered recoverable loss of earnings following termination of the employment in consequence of the dismissal ("Remedy").

18. The appeal came before Langstaff J on the paper sift. He permitted the second ground (remedy) to go forward to a full hearing, being of some importance; however he took the view that the first ground (constructive dismissal) was misconceived and directed no further action on that ground under EAT Rule 3(7). That decision was communicated to the parties by letter from the Deputy Registrar dated 7 March 2007.
19. Dissatisfied with the learned Judge's opinion as to the first ground the Respondent exercised its right under EAT Rule 3(10) to an oral hearing before a Judge. That application came before Mr Recorder Luba QC on 13 April 2007. On that occasion Mr Self, appearing on behalf of the Respondent at what used to be called an ex parte hearing, drew attention to the judgment of Lady Smith, sitting with members, including Mr Worthington who sits on the present appeal, in Abbey National Plc v Fairbrother [2007] IRLR 462. That judgment was handed down on 12 January 2007, after the Employment Tribunal Judgement in this case. Reading the judgment given by the learned Recorder it is clear that he accepted, without hearing argument to the contrary, that Fairbrother had a considerable impact in this branch of the law, that is cases of constructive unfair dismissal where the act alleged to represent the breach of the implied terms is the mishandling by the employer of a grievance procedure. He observed (transcript, paragraph 10) that there is no direct authority as to whether precisely the same principles apply in a 'last straw' case. On that footing he permitted the first ground of appeal also to proceed to this Full Hearing. We shall consider each ground of appeal separately and in turn

Constructive Dismissal

20. Since Fairbrother is at the forefront of Mr Self's submissions on this part of the appeal we shall begin with that case and its effect on the present case.
21. The problem in that case for Ms Fairbrother and a colleague, Mrs Roberts, was that she felt that other women employed in the Abbey National office where she worked behaved unpleasantly towards her and taunted her about the slow pace at which she worked. Eventually she walked out in tears and reported the matter to her area manager; he suggested that all involved sit down together over a cup of tea and sort it out between themselves. Dissatisfied with that response she raised a formal grievance, complaining that she had been bullied and her complaint had been mishandled. Her grievance was rejected and an internal appeal against that decision was dismissed. She then resigned on the basis of the employer's failure to uphold her grievance and brought complaints of constructive unfair dismissal and disability discrimination (that latter complaint need not concern us).
22. An Employment Tribunal upheld the complaint of constructive unfair dismissal, finding that although the employer was not bound to uphold the grievance, there were 'a number of serious flaws' in the grievance procedure. On appeal the EAT presided over by Lady Smith allowed the employers appeal, reversing the finding of constructive dismissal.
23. The material reasoning of the EAT is contained in paragraphs 30 – 36 of the judgment. In considering whether an employer is in breach of the 'Malik' term of trust and confidence Lady Smith drew attention to the question as to whether the employer had reasonable and proper cause for the conduct complained of.
24. The Malik term is that formulated by Browne-Wilkinson P in Woods v WM Car Services (Peterborough) Ltd [1982] IRLR 413. The employer shall not without reasonable and proper cause, conduct itself in a manner calculated or likely to destroy or seriously damage the relationship of confidence and trust between employer and employee.
25. At paragraph 30 Lady Smith identified three questions to be asked in a constructive dismissal case (in which the trust and confidence term is relied on):

"1. what was the conduct of the employer that is complained of?

2. did the employer have reasonable and proper cause for that conduct?

If he did have such cause, then that is an end of it. The employee cannot claim that he has been constructively dismissed. If the employer did not have such cause, then a third question arises:

3. was the conduct complained of calculated to destroy or seriously damage the employer/employee relationship of trust and confidence."

To that third question I would respectfully insert the words 'or likely' after the word 'calculated' in accordance with the Woods formulation.

26. The Employment Appeal Tribunal in Fairbrother (paragraphs 34 – 35) adopted the approach of His Honour Judge McMullen QC in Hamilton v Tandberg Television Ltd paragraphs 22 – 24, a case in which permission to appeal was refused by the Court of Appeal [2003] EWCA Civ 422, that is to apply the band of reasonable responses approach relevant to the Section 98(4) ERA reasonableness question; see Sainsbury's v Hitt [2003] IRLR 23 (CA), to the question as to whether an employer's operation of a grievance procedure breaches the implied term of trust and confidence.
27. Then at paragraph 36 Lady Smith said this:

"36 We would go further than this Tribunal in Hamilton, however, to the extent that we see no reason for this statement of principle expressed not being of general application. Accordingly, in a constructive dismissal case involving resignation in the context of a grievance procedure, when asked in the second question we have posed above it seems to us that it is not only appropriate but necessary to ask whether the employer's conduct of the grievance procedure was within the band or range of reasonable responses to the grievance presented by the employee. We would add that we are not persuaded that it is appropriate to separate out each part of the grievance procedure to see whether it was reasonably conducted or not. Just as happens when the conduct of a disciplinary procedure falls to be considered (see: Whitbread v Mills), the conduct of a grievance procedure requires to be looked at as a whole. Only if it has been conducted in a manner in which no reasonable employer would have conducted it can it be said that he did not have reasonable and proper cause for his conduct."

28. In this appeal Mr Self seizes on the reasoning of the EAT in Fairbrother to submit that the approach in that case must be followed when the alleged failings in a grievance procedure are the 'last straw' leading to resignation as well as when the handling of the grievance is the sole cause for the resignation. We interpose that it is clear from the EAT judgment in Fairbrother (see paragraph 11), that the case proceeded on the basis that the reason for the employee's resignation was that her grievance was not upheld.
29. We are unable to accept that submission. Fairbrother was not a 'last straw' case; the earlier decisions of the Court of Appeal in Lewis v Motorworld and Omilaju are not referred to in the judgment.
30. In our collective judgment a 'last straw' case raises different considerations to those in Fairbrother. In the present case Mr Self submits that the critical date is 30 September 2004, when the Claimant went off work sick, never to return. At that stage, on the Employment Tribunal's findings, the cause of her illness was overwork and bullying, as she perceived it, by Mr Baldock. Had she then promptly resigned, complaining of breach of the implied term, Mr Self does not, without conceding the point, argue strongly against a finding of constructive dismissal. However, she did not then resign; she continued to receive pay from the Respondent, thus affirming the contract (see Sharp). The only way in which she could revive the earlier breach, he submits, is if the Respondent's conduct of the grievance procedure, relied on by the Claimant as the final straw, fell outside the band of reasonable responses open to an employer carrying out that procedure, applying Fairbrother.
31. In rejecting that submission we turn to Omilaju. We have earlier observed that this Employment Tribunal referred to that authority in their self-direction at paragraph 51 of their reasons. It may be that the Chairman, Ms Gilbert, was especially familiar with that case, noting from the judgment of Dyson LJ (paragraph 4), with which the other members of the Court agreed, that Ms Gilbert chaired the Employment Tribunal which initially rejected Mr Omilaju's complaint of constructive unfair dismissal, which decision was first overturned by the Employment Appeal Tribunal and then restored by the Court of Appeal.
32. We derive the following principles from Omilaju:.

(1) the final straw act need not be of the same quality as the previous acts relied on as cumulatively amounting to a breach of the implied term of trust and confidence, but it must, when taken in conjunction with the earlier acts, contribute something to that breach and be more than utterly trivial.

(2) Where the employee, following a series of acts which amount to a breach of the term, does not accept the breach but continues in the employment, thus affirming the contract, he cannot subsequently rely on the earlier acts if the final straw is entirely innocuous.

(3) The final straw, viewed alone, need not be unreasonable or blameworthy conduct on the part of the employer. It need not itself amount to a breach of contract. However, it will be an unusual case where the 'final straw' consists of conduct which viewed objectively as reasonable and justifiable satisfies the final straw test.

(4) An entirely innocuous act on the part of the employer cannot be a final straw, even if the employee genuinely (and subjectively) but mistakenly interprets the employer's act as destructive of the necessary trust and confidence.

33. It therefore seems to us that in a true final straw case the range of reasonable responses test has no application to the employer's conduct of a grievance procedure where that conduct is the final straw relied on. We do not understand Fairbrother to say otherwise, notwithstanding the apparently wide wording of paragraph 36; if it did, it simply could not stand in the light of Omilaju and Lewis v Motorworld.
34. Applying those principles to the facts as found in the present case:

(1) the acts relied upon by the Claimant of overwork and bullying by Mr Baldock amounted cumulatively to a breach of the implied term as at 30 September 2004.

(2) Thereafter, by continuing in the employment whilst off sick the Claimant affirmed the contract.

(3) However, the Respondent's failure 'to carry out an adequate and proper investigation into her grievances' (Reasons paragraph 53) contributed materially to the earlier acts relied on so as cumulatively to amount to a breach of the implied term.

35. Mr Self submits that as to the employer's conduct of the grievance procedure the Employment Tribunal fell into error by viewing the matter subjectively through the Claimant's eyes, rather than objectively as the authorities require. We disagree. Whilst the Claimant's subjective views are recorded, e.g. the Claimant was very unhappy about the paragraph in Ms Munn's letter of 9 February relating to Mr Baldock (Reasons, paragraph 44), in our view the final judgment of the Employment Tribunal at paragraph 53 represented their objective assessment of the Respondent's conduct of the grievance procedure.
36. In these circumstances we see no grounds in law for interfering with the Employment Tribunal's conclusion that the Claimant was constructively dismissed. In the absence of any potentially fair reason for dismissal being advanced by the Respondent that dismissal was unfair.

Remedy

37. We agree with the preliminary assessment of Langstaff J in this case. This ground of appeal is of some importance. The precise point of law raised has not been the subject of past judicial consideration on the cases which we have been shown.
38. Mr Self places the House of Lords decision in Eastwood at the forefront of his submissions. One criticism he advances in respect of the Employment Tribunal's approach is that, whilst listing the authorities considered on this aspect of the case at paragraph 67 of their Reasons the Employment Tribunal failed to analyse those cases. We do not regard that complaint as of itself fatal to the sustainability of the Employment Tribunal's conclusions, but we do regard it as important that we carry out a full analysis. In considering Eastwood it is necessary to view that case in the context of 3 earlier House of Lords decisions, chronologically Malik; Johnson v Unisys Ltd [2001] IRLR 279, and Dunnachie v Kingston-Upon-Hull City Council [2004] IRLR 727.
39. Before doing so we should first refer to the relevant provisions of the ERA:

By Section 123(1):

"… 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."

'Dismissal' takes one of 3 forms, as defined in Section 95(1). We shall refer to just 2 of those forms of dismissal:

"(a) the contract under which he [the employee] is employed is terminated by the employer (whether with or without notice) [actual dismissal]

(c) 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 [constructive dismissal]"

40. Although both forms of dismissal (and the third, expiry of a limited-term, formerly fixed term contract; Section 95(1)(b) give rise to protection against unfair dismissal under Part X ERA indiscriminately, Parliament has chosen to draw a distinction between constructive dismissal on the one hand and the other 2 forms of dismissal on one occasion at least; the application of the statutory grievance procedure (SGP) as opposed to the statutory dismissal and disciplinary procedures (DDP) under the Employment Act 2002 and the Regulations made there under, the Employment Act 2002 (Dispute Resolution) Regulations 2004.
41. By Regulation 2(1) of the Regulations 'dismissed' has the meaning given to it in Section 95(1)(a) and (b) ERA. In consequence, the SGP applies to cases of constructive dismissal, the DDP to the other 2 forms of dismissal under Section 95(1).
42. The issue of law between counsel in the present case may be shortly stated. For the Respondent Mr Self submits that the Claimant has suffered no loss of earnings in consequence of her dismissal (Section 123 (1). Her loss of earnings after 15 March 2005 flows not from her dismissal, but from her incapacity to work from and since 30 September 2004, the date which he submits is crucial in this case. The dismissal itself, taking effect on 15 March, had no effect on her incapacity to work nor on her loss of earnings. That proposition, he submits, is supported by the House of Lords decision in Eastwood and the Scottish cases of Dignity Funerals and the earlier EAT case of Devine v Designer Flowers Ltd [1993] IRLR 517.
43. Ms Stanzel, on the other hand, submits that in a case of constructive, as opposed to actual dismissal, it is material to consider the cumulative sequence of events together amounting to the Respondent's repudiatory breach which the Claimant finally accepted, on notice, by her letter of 15 February 2005. It was that repudiatory conduct which led to the Claimant's medical incapacity starting on 30 September 2004 and continuing after termination on 15 March 2005, giving rise to a continuing loss of earnings thereafter in consequence of the dismissal, as the Employment Tribunal held.
44. It is our task to decide which of those propositions of law is correct.
45. We begin with 2 observations about the previously decided cases. First, with the exception of Dunnachie, the House of Lords authorities now under consideration concerned civil actions relying in part on the implied term of trust and confidence. Tribunal proceedings in those cases, save for Malik had already been resolved in favour of the Claimants. Thus, their Lordships' observations on the recovery of compensation for unfair dismissal were tangential to the issues arising in those cases. Secondly, all cases, including Devine and Dignity Funerals, involved actual, not constructive dismissal. We must ask ourselves whether that distinction is significant.
46. We deal first with such assistance as may be derived from the House of Lords cases. In Malik the Claimant employees were dismissed by the Bank on grounds of redundancy. They then brought claims in the liquidation claiming 'stigma' damages for pecuniary loss said to be caused by the Bank's breach of the implied term of trust and confidence. The question which reached the House of Lords was whether the claims raised a reasonable cause of action. The House of Lords answered that question in the affirmative, having considered the effect of the old House of Lords case of Addis v Gramophone Company Ltd [1909] AC 488. The leading speech was delivered by Lord Nicholls.
47. Of interest to the present debate are Lord Nicholls' observations (paragraphs 21 – 22) on what he described as 'Premature termination losses'. He said:

"… If the employer commits a breach of the term [of trust and confidence], and in consequence the contract comes to an end prematurely, the employee loses the benefits he should have received had the contract run its course until it expired or it was duly terminated …" (paragraph 21)

"It follows that premature termination losses cannot be attributable to a breach of the trust and confidence term if the contract is terminated for other reasons, for instance for redundancy or if the employee leaves of his own volition. Since the trust-destroying conduct did not bring about the premature termination of the contract, ex hypothesi the employees did not sustain any loss of pay and so forth by reason of the breach of trust and confidence term. That is the position in the present case." (paragraph 22)

48. We pause to observe that that is not the position in our case. Here, the Respondent's trust-destroying conduct, finally accepted by the Claimant, brought about the premature termination of the contract; constructive dismissal.
49. Johnson v Unisys is a case which created some controversy, principally due to the suggestion made by Lord Hoffman (paragraph 55) that compensation for unfair dismissal could, contrary to the principle in Norton Tool v Tewson [1972] IRLR 86 (NIRC. Donaldson J), include an award for injury to feelings. That suggestion was later scotched by a unanimous decision of the House in Dunnachie.
50. Mr Johnson commenced his employment with Unisys in 1971. In 1985 he suffered from work-related stress and had to take time off work. Following a break in service he was finally dismissed, unfairly an Employment Tribunal held, for a reason related to his conduct. The Employment Tribunal awarded him the then maximum compensatory award permissible, applying the statutory cap, subject to a deduction for his own contributory conduct.
51. Subsequently he commenced proceedings in the County Court for damages said to be caused by the manner of his dismissal, leading to his suffering, he alleged, a mental breakdown rendering him unfit for work in the future.
52. The County Court Judge, His Honour Judge Ansell, struck out the claim, taking the view that the Claimant was in effect seeking to claim damages for unfair dismissal. He invoked the Addis principle.
53. The House of Lords upheld that decision. However, Lord Steyn's reasoning differed from that of the remainder of their Lordships. Lord Steyn returned to his view in Johnson in the later case of Eastwood to which we must now come.
54. First, the background. In Eastwood the 2 claimants were suspended and eventually dismissed by their employer on trumped up charges of serious misconduct. By then both were suffering from stress. Following dismissal both members presented complaints of unfair dismissal to the Employment Tribunal which were upheld. Compensation for their unfair dismissal was then agreed between the parties.
55. Thereafter the Claimants brought actions in the County Court claiming damages for breach of contract; the employer's conduct was said to amount to a breach of the trust and confidence term causing psychiatric injury which sounded in damages.
56. The County Court Judge struck out the claims and the Court of Appeal agreed (2002) IRLR 447. In the Court's view the compensation recoverable in the Employment Tribunal covered the substance of that which was claimed in the civil proceedings.
57. Mr McCabe, on the other hand, succeeded in the Court of Appeal after his claim for damages for psychiatric injury was struck out in the High Court (2003) IRLR 87. He had been employed by the Council as a teacher. He was dismissed following complaints by pupils of inappropriate sexual conduct. His complaint of unfair dismissal was upheld and he was award the then maximum compensation award. That decision was undisturbed by the Employment Appeal Tribunal.
58. His High Court claim was limited to one of damages for psychiatric injury, said to flow from the employer's breach of the implied term of trust and confidence in suspending him and failing to inform him of the allegations against him and to carry out a proper investigation.
59. In the House of Lords the Claimants in each case succeeded. Again, the leading speech, with which Lords Hoffmann, Rodger and Brown expressly agreed, was delivered by Lord Nicholls. Lord Steyn, whilst agreeing in the result, reasoned the matter differently from Lord Nicholls, with particular reference to Johnson v Unisys. We shall return to that reasoning later; first, the majority opinion expressed by Lord Nicholls.
60. Of particular interest in the present case are Lord Nicholls' observations on the 'Johnson exclusion area', explained at paragraphs 27 – 31. In summary, an employee may have a common law claim for damage flowing from a breach of contract which is independent of any subsequent dismissal, whether actual or constructive. One example is suspension (see McCabe). However, an employee's remedy for unfair dismissal, whether actual or constructive, is the remedy provided by statute (ERA). Usually, an employer's failure to act fairly in the steps leading to dismissal does not of itself cause the employee financial loss. The loss arises when the employee is dismissed and it arises by reason of dismissal. Then the resulting loss falls squarely within the Johnson exclusion area (paragraph 28). It follows that no common law action for breach of contract is maintainable for the financial loss caused.
61. At paragraph 31 Lord Nicholls said:

"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 is within that area. … Judges and tribunals … 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."

62. Mr Self submits that, based on Eastwood, the loss of flowing from psychiatric illness caused by the employer's conduct can only be compensated under Section 123(1) ERA if it is in consequence of the dismissal. It must therefore post-date the effective date of termination. As examples of that proposition he cites Devine and Dignity Funerals. In the former case the Claimant was (actually) dismissed by her employer. As a result of her dismissal she suffered from anxiety and depression preventing her from finding fresh work. An Industrial Tribunal found her dismissal to be unfair but declined to make an award for loss of earnings. The Employment Appeal Tribunal reversed that finding, holding that an employee who becomes unfit for work wholly or partly as a result of an unfair dismissal may recover loss of earnings for a reasonable period following the dismissal. The conditions of Section 74(1) Employment Protection (Consolidation) Act 1978 (now Section 123(1) ERA) were fulfilled.
63. A similar position obtained in Dignity Funerals. The Claimant was summarily dismissed (unfairly, held the Employment Tribunal) by his employer and 3 days later became unfit for work due to reactive depression. The Court of Session, citing Devine without disapproval (paragraph 13), held that the compensatory award depends on proof of loss. Where the facts showed that the dismissal was the sole cause of the loss then a full award for loss of earnings would normally be appropriate.
64. Thus, submits Mr Self, the question under Section 123(1) is whether the illness preventing the Claimant from working followed and was a consequence of the dismissal.
65. In the present case it did not. The dismissal took effect on the Claimant's acceptance of the Respondent's repudiatory breach in February 2005. Her illness preventing her from working started on 30 September 2004. It therefore could not be in consequence of the dismissal and the Claimant's loss of earnings following termination of the contract could not be attributed to the dismissal. Had the Claimant resigned on 30 September 2004 in circumstances amounting to constructive dismissal and could show that her illness was caused by that dismissal she might have been able to recover her subsequent loss of earnings under Section 123(1). However, she did not then resign; she affirmed the contract and drew sick pay from the Respondent. When she in fact came to resign, thus giving rise to her constructive dismissal, it could not be said that the illness which commenced months earlier was a consequence of that dismissal.
66. We accept that had the Claimant been actually dismissed by the Respondent in February 2005, let us assume unfairly on grounds of ill-health capability, it could not be said that her illness was caused by such dismissal. However, the real question is whether, for present purposes, actual and constructive dismissal fall to be treated in the same way.
67. In criticizing the majority reasoning in Johnson v Unisys in the course of his speech in Eastwood Lord Steyn disagreed with the view there expressed (see Lord Hoffmann, paragraph 55) that an employee, faced with the repudiatory breach of contract by his employer who accepts the breach and leaves is then limited to a claim of unfair dismissal; he has no separate common law claim based on the breach (see Eastwood paragraph 40). That highlights the majority approach in Johnson v Unisys, 'the Johnson exclusion area' as it was termed in Eastwood. But turning that around, it underscores, in our view, the corollary; that the employee does have a claim for consequential loss in his unfair dismissal claim.
68. This proposition is emphasized by a further criticism made by Lord Steyn in Eastwood at paragraphs 41 - 42. He acknowledged that the majority in Johnson assumed that an employer's conduct causing psychiatric illness to an employee resulting in financial loss may be compensated under Section 123(1). Lord Nicholls considered that the common law claim there raised covered the same ground as the statutory rights.
69. Lord Steyn then referred to the 1994 Extension of Jurisdiction Order, granting the Employment Tribunal's jurisdiction to hear breach of contract claims. He noted that under the 1994 Order, reflecting Section 3(3) Employment Tribunals Act 1996, the Employment Tribunal's jurisdiction does not extend to claims for damages in respect of personal injury. That is plainly correct. In his opinion it followed that claims for financial loss caused by psychiatric injury are excluded from the jurisdiction of Employment Tribunals.
70. That observation is relied on by Mr Self. He submits that the Claimant's cause of action in the present case lies not in the Employment Tribunal but in an action for damages for personal injury in the civil courts.
71. We reject that submission. In our view the assumption made by the majority of their Lordships in Johnson v Unisys is correct and the criticism levelled by Lord Steyn in Eastwood is, with respect, misplaced.
72. A claim for damages for personal injury on the facts of our case would require the Claimant to show that her psychiatric condition was caused by the negligence or breach of duty of the Respondent. If she established liability damages would consist of general damages for pain, suffering and loss of amenity, together with special damage, being her loss of earnings (less sick pay received) from 30 September 2004 until termination of her employment with the Respondent and thereafter continuing losses for so long as she remained unable to work as a result of the Respondent's negligence. She may, additionally, have a claim for her handicap on the labour market under the Smith v Manchester principle.
73. Instead, what she claims in these proceedings is simply loss of earnings following the termination of her employment by her constructive unfair dismissal. That dismissal, as Section 95(1)(c) makes clear, consists of 2 elements; repudiatory conduct by the employer and acceptance of that breach by the employee.
74. In this case the employer's conduct consisted of a breach of the implied term of trust and confidence representing an accumulation of events dating back to 2001. The breach caused her illness on 30 September 2004. She accepted the breach in February 2005. She 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).
75. It follows that we accept Ms Stanzel's principal submission; that the course of conduct by the Respondent amounting to a breach of the implied term forms part of the constructive dismissal and that the Claimant's ill-health caused by that breach is to be treated as a consequence of the dismissal leading to 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.
76. In short, the Employment Tribunal's conclusion was correct, subject to one qualification. We have been taken to the judgment of Burton P in Morgans v Alpha Plus Security Ltd [2005] IRLR 234, following Puglia v C James & Sons [1996] IRLR 70 Mummery P) for the proposition that incapacity benefit falls to be deducted from the loss of earnings recoverable for unfair dismissal. For the avoidance of doubt that deduction should be made when the matter returns to Ms Gilbert's Tribunal for the remedy hearing.

Conclusion

77. For these reasons this appeal fails and is dismissed.