Judgment approved by the court for handing down Betancourt v United Kingdom Research and Innovation
Rolls Building
Fetter Lane, London, EC4A 1NL
Before :
HIS HONOUR JUDGE JAMES TAYLER
Between :
Mr J C Betancourt
Appellant
- and -
United Kingdom Research and Innovation
Respondent
Mr J C Betancourt, the Appellant in person
Paul Livingston of Counsel(instructed by UKRI Legal) for the Respondent
Hearing date: 5 August 2025
JUDGMENT
SUMMARY
CONTRACT OF EMPLOYMENT
The Employment Tribunal erred in law in holding that the claimant had not been wrongfully dismissed. The claimant was dismissed without notice, with a payment of notice monies. There was no payment in lieu of notice clause in the contract of employment. That meant that the dismissal was wrongful. The Employment Tribunal should have held that the claimant was wrongfully dismissed but there was no entitlement to compensation because the claimant would have been dismissed with five weeks notice starting on 15 March 2023 had the respondent adopted the least burdensome manner of lawfully terminating the claimant’s contract in circumstances in which neither party wanted the contract to continue. The claimant had received a payment that represented what he would have been paid for that five-week period.
HIS HONOUR JUDGE JAMES TAYLER:
The respondent operated a contractual Probation Policy. The Probation Policy provided for two review meetings that would generally take place over 6 months. The terms of the contract of employment and the Probation Policyincluded a 5 week notice provision during the probationary period. The contract of employment included a garden leave clause but did not include a provision for payment in lieu of notice. After a meeting described as a first probationary meeting, the claimant was dismissed with immediate effect with a payment of 5 week’s pay. The appeal turns on the consequences of the dismissal.
The appeal is from a judgment of Employment Judge Manley after a hearing on 5 January 2024. The judgment was sent to the parties on 22 January 2024.
I take the facts predominantly from the judgment of the Employment Tribunal and some of the documents referred to in the judgment.
The claimant commenced employment with the respondent on 23 January 2023 as a contracts co-ordinator. The claimant worked part-time 20 hours per week. He wanted to work two 10 hour days. From the outset there were disputes about the claimant’s pattern of work.
The claimant’s line manager was Lynn Noble, Head of Finance, who was supported by Helen Millar, Deputy Head of Human Resources.
The claimant’s contract of employment provided for a probationary period:
Probation
Employment is subject to the satisfactory completion of a probationary period of 6 months.
Your appointment will be confirmed, provided your performance, attendance and conduct have been satisfactory. If you do not reach the required standards your appointment will normally be terminated, although in exceptional circumstances the probationary period may be extended.
During your probationary period, either party can terminate employment by giving to the other the following notice:
Bands 1-4: 5 weeks notice …
The probation procedure is set out in the MRC’s Probation Policy.[emphasis added]
In the contract the probationary period was not limited to being an opportunity to assess “performance” but also to consider whether “attendance and conduct” were satisfactory.
The contract of employment included a garden leave clause but no clause permitting payment in lieu of notice.
The respondent accepted that the Probation Policy was contractual. The Probation Policy first set out general principles:
Principles
All new MRC employees will be subject to a probationary period of at least 6 months.
All employees will be treated fairly and consistently in line with the MRC Equalities and Diversities policy.
All matters arising during the probation period will be dealt with promptly.
Within the 6 month probationary period all MRC employees should receive a 3-month assessment and a probation assessment at the 6-month stage of their employment.
Where probationary issues arise that require urgent action before the 3 month or 6 month probation assessments, the timescales for these meetings can be adapted to ensure matters are dealt with promptly and effectively.The general framework of the policy should still be followed. Further guidance on this can be gained from the regional/unit HR team.
The MRC is committed to ensuring that a new employee will receive the training and support that will enable them to reach the standards required of them. …. [emphasis added]
The Probation Policy permitted the timescales to be altered, and provided for “training and support”.
The Probation Policy then set out its purpose:
Probationary procedure
Purpose of probationary period
The purpose of the probationary period is to allow time for a MRC manager to determine whether a new employee has demonstrated the values, capability, skills and knowledge necessary to perform their role in their MRC employment. During this time the line manager should assess the employees’ performance and give the appropriate feedback and support to allow the new employee to fully develop within the role
During the probationary period, either party can terminate employment by giving to the other the following notice:
Bands 1 – 4: 5 weeks’ notice
Bands 5 - 7: 2 weeks’ notice
These notice periods will continue to apply until the employee has received notification in writing that their appointment is confirmed and that they have passed the probationary period. The MRC will provide this notice should you fail the probation period.
Length of probationary period
The probationary period will normally last for 6 months from the date the employee started with the MRC.
In some circumstances this may be extended where the manager has not been able to fairly assess the performance of the employee during the 6 months, or whereby the employee has been unable to meet the job criteria as discussed during their review period.
If a manager wishes to extend a probationary period they should consult with their regional/unit HR team about this decision.
Where a probationary period is to be extended it must be for no longer than a further 6 months. The manager must notify the employee of the extension, the reasons for doing so and any targets that must be achieved within the extension in writing. …
Probation Assessments
Probation assessments provide the manager and the employee the opportunity to review progress made since the employee started with the MRC.
The manager will carry out two probation assessments with the employee, a 3 month probation assessment and a 6 month probation assessment.
The 3 month and 6 month probation assessments do not replace any regular formal or informal performance management arrangements in place locally e.g. one-to-one meetings, and should complement these discussions.
The 6 month probation assessment should be completed and returned to the UK SBS for processing before the date the employee reaches their 6 months in employment e.g. if an employee starts on the 10th March, the 6 month probation assessment should be completed and form returned to UK SBS by 9th September.
Where a manager fails to carry out the 6 month probation assessment, the probationary period may be taken to be passed by default. In extreme cases there may be a reason why a probation assessment meeting could not be held e.g. due to absence, in which case the meeting will be postponed and held at the earliest opportunity. It is not normally expected that a postponement would be for more than 5 working days.
Raising concerns about under performance
Any concerns about under-performance should be dealt with through the probation assessment meetings process in sections 3, and 4.
Managers are also expected to have informal discussions with the employee outside of this process to try to resolve performance issues. [emphasis added]
The Probation Policy provided for assessment of “values, capability, skills and knowledge” but in the sections concerning probation assessment focussed on “underperformance”.
Section 3 of the Probation Policy concerned the 3-month probation assessment:
… 3.2 Dealing with underperformance at 3-month Probation assessment
Concerns over an employee’s performance during the probationary period should be discussed at the 3 month probation assessment.
Where concerns are raised the manager should:
Make clear the specific areas in which the individual’s performance is below expectations.
Demonstrate and explain the grounds and /or evidence for this view.
Explore with a view to identifying possible reasons for the under-performance.
Give the individual the opportunity to explain their under-performance and to raise any concerns that he/she may have about the job.
Ensure that the employee is aware of the required improvements in relation to each element of the duties about which there is a concern, and to arrange further training and job shadowing where appropriate.
Inform the employee that their performance will be reviewed again 6 months into their employment and that failure to improve by that time may result in their employment with the MRC being terminated.
Where concerns over performance have been raised during the 3 month probation assessment the manager will clearly document this on the probation assessment form and will confirm the points raised at that meeting in writing to the employee, normally within 5 working days. [emphasis added]
Section 4 of the Probation Policy provided for a 6 month probation assessment:
Holding a Probation Assessment
If the employee’s performance has not improved by the 6 month probation assessment stage or if new concerns over performance have arisen between the 3 month assessment and the 6 month assessment then the manager will write to them to formally invite them to a probation assessment to discuss their performance in further detail.
The manager will be normally supported at the probation assessment by a member of the regional/unit HR team.
The letter of notification must indicate that:
The purpose of the probation assessment is to assess, in further detail, progress made since the 3 month probation assessment discussion;
The probation assessment could either result in:
The confirmation of appointment
The probation period being extended to allow further development
The termination of the contract of employment;
Is being held formally under the MRC Probationary policy; and,
That they have the right to be accompanied by a MRC work colleague or represented by a Trade Union Representative of their choice.
At this meeting the manager will:
Make clear the specific areas in which the individual’s performance is below expectations.
Demonstrate and explain the grounds and /or evidence for this view.
Explore with a view to identifying possible reasons for the under-performance.
Give the individual the opportunity to explain their under-performance and to raise any concerns that he/she may have about the job.
Review the history of the case, including the steps taken to assist the employee in his/ her achievement of the requisite standards of performance
The manager should then make a decision whether to:
Confirm the employee’s appointment;
Extend the probationary period in accordance with this procedure, ensuring that the employee is aware of the required improvements in relation to each element of the duties about which there is a concern, and confirm the date for the Final Probation Assessment. or
Seek approval to terminate the employee's probationary appointment, in line with MRC's policies on Probation and (inc. local schemes of) Delegated Authority.
Following this meeting, and upon receipt of requisite approvals, the manager will decide upon the outcome of the review and will confirm this in writing to the employee, normally within five working days of the meeting. The formal agreed outcome will then be recorded and confirmed to the employee by UK SBS in writing. [emphasis added]
Section 7 of the Probation Policy provided for an appeal.
The respondent had a Notice Period Policy that repeated the notice provision that applies during the probationary period:
Notice periods during the probationary period
During the probation period, either party can terminate employment by giving the other the following notice:
Bands 1-4 : 5 weeks’ notice
Bands 7-5 : 2 weeks’ notice
The Employment Tribunal held that shortly after the commencement of the claimant’s employment, in addition to issues about his working pattern “the respondent began to have other concerns about the claimant’s behaviour”. The Employment Tribunal recorded that on 22 February 2023 the claimant wrote to the respondent:
I do not wish to inconvenience you with the specifics but, further to my most recent conversation with Lynn, I fear that l have lost trust and confidence in my employer, which, as I am sure you are aware, are very difficult, if not impossible, to restore.
Although I have only held the post for 5 weeks, I am absolutely convinced that I can do my job both competently and efficiently. Nonetheless, it is clear that neither the MRC nor my line manager will give me the support I need to do so, which is truly regrettable.
I will be working in Spain next week, however, I will be back the week after next so that we can decide what to do next. [emphasis added]
On 3 March 2023, Ms Millar requested and was granted authorisation to terminate the claimant’s contract of employment. She attached to an email a list of concerns raising issues about the claimant such as “failure to follow reasonable instructions at work” and “inflexibility with working hours”. Ms Millar asserted that “delivery of communication in meetings can be negative and uncooperative” and that “he does not wish to cooperate, compromise or reach a mutual understanding unless it is on his own terms”. Ms Millar concluded:
We would like to invite JCB to attend a formal probation assessment meeting on Wednesday, 15 March 2023 to discuss these concerns in more detail.
Having considered the above concerns, we do not feel that he will be able to carry out his role to the required standards and conduct on a consistent basis. His behaviour is not in line with our values/standards expected, and could damage the reputation of the MRC by its customers and users. Therefore, we would like to terminate his probationary appointment. He will be entitled to five weeks’ notice, and therefore his employment end date will be 18 April 2023. As a Finance member of staff, we would like him to serve his notice period at home and he will not be expected to attend work or work remotely. His access to systems will be deactivated with immediate effect to avoid damages.
While Ms Millar stated that the claimant would be invited to a “formal probation assessment meeting” it is clear that a decision had been taken to terminate his employment and that the meeting would not be used to seek an improvement in his performance as envisaged in the Probation Policy. Ms Millar had concluded that the working relationship with the claimant was untenable. The claimant was of the same opinion having already referred to a breakdown in trust and confidence.
On 7 March 2023, the claimant was invited to a “Formal Probation Assessment Meeting” to be held on 15 March 2023. Although the claimant was informed that “This probation assessment meeting could result in any of the following options: 1) The confirmation of appointment; 2) The probation period to continue or 3) The termination of your contract of employment”, the reality was that a decision had been taken to dismiss him.
A script was produced for the meeting that ended with the claimant being informed that he was to be dismissed:
Having considered the information, we do not feel that you are able to carry out your role to the required standards. Your values do not match those of our organisation, and it is apparent you are not happy working for the MRC. With such a small team, it is vital that we maintain an effective and collaborative environment.
Regrettably it has been decided not to continue your employment with MRC.
On 7 March 2023, the claimant sent an email to the respondent contending that a formal probation assessment would only apply at the six-month stage.
The meeting went ahead on 15 March 2023. The claimant was dismissed with immediate effect and paid 5 weeks' notice monies.
The claimant appealed against his dismissal on 24 March 2023 on the basis that while he was seeking to overturn the dismissal, he did not wish to be reinstated. The claimant sought an assurance that if he was successful in his appeal he would not be reinstated because he had lost trust and confidence in the respondent. The respondent refused to give such an assurance and the claimant withdrew the appeal.
It is clear that as of the date of the claimant’s dismissal the respondent had concluded that the claimant was not the right person for the job and the claimant thought that the respondent was not the right employer for him. The issue between them was whether the respondent was required to keep the claimant in employment until both probation assessments had been completed over a period of about six months after which he could be given five weeks’ notice. What the claimant sought in the Employment Tribunal was compensation to cover that period.
On 21 April 2024, the claimant submitted a claim form to the Employment Tribunal raising a complaint of wrongful dismissal and seeking an uplift for failure to comply with the ACAS Code of Practice on Disciplinary and Grievance Procedures. The claimant sought to rely on the principle in Gunton v Richmond LBC [1980] I.C.R. 755 to assert that he could claim damages for wrongful dismissal to cover the period that it would have taken the respondent to go through the stages of the probation assessments.
The judgment of the Employment Tribunal was:
The claimant was not dismissed in breach of the respondent’s probationary policy as the respondent was entitled to dismiss the claimant under the policy before the procedure had been carried out and before the end of the six-month period. The claimant was not wrongfully dismissed.
The respondent was not entitled to make a payment in lieu of notice under the claimant’s contract but no damages flow from that breach.
The claim is dismissed. [emphasis added]
The reasoning of the Employment Tribunal was concise:
Conclusions
I will provide my conclusions in line with the agreed list of issues, although, to some extent, they overlap. Some of them will be obvious from my findings of fact but some might need further elaboration.
I cannot find that the claimant was dismissed in breach of the probationary policy. That policy specifically and incontrovertibly states that notice of termination can be given during the probation period.
Nor can I find that the respondent was not entitled to dismiss during the probation period for the same reason. The respondent was entitled, because the contract says so, both within the probationary policy itself and in the notice clauses, to dismiss with five weeks’ notice.
The respondent was not entitled to make a payment in lieu of notice because that right is not in the contract. However, the claimant cannot show any loss which flows from that payment being made. I make no findings on the question of whether there were any failures to follow the ACAS Code as it does not arise.
The claim is dismissed.
The claimant appealed. In Ground 1 he asserted that the Employment Tribunal had failed to “apply the well-established principles of contractual interpretation”. By ground 2 the claimant asserted that the Employment Tribunal had failed to “apply the principles” in Gunton.
The appeal was considered by John Bowers KC, Deputy Judge of the High Court at the sift stage who permitted these two grounds to proceed for the following reasons:
Having seen the Probation document, I think that all the Grounds are reasonably arguable save for Ground 3 which is unnecessary as it simply says that if the correct decision had been made an award for damages would follow. The overriding issue for me (which is not drawn out explicitly in the Grounds of Appeal) is what is the purpose of the procedural protections if the contract can be terminated by notice in any event. [emphasis added]
After the appeal had been argued I asked that a letter be sent to the parties in the following terms:
I have been working on the Judgment in this matter. I consider that the proper analysis of this matter may be that immediate dismissal with payment of notice monies was a wrongful dismissal and so the task of the Employment Tribunal was to assess compensation on the basis that absent the breach the respondent would have adopted the least burdensome mode of termination of the contract (see the judgment in Mackenzie v AA Ltd attached). I would be grateful for comments on whether this is the correct analysis and, if so, what you contend would constitute adopt the least burdensome mode of termination of the contract in the circumstances of this case.
In response the claimant contended:
The Respondent has unequivocally accepted — both at the hearing and in its written response dated 02/09/25 — that termination by way of a PILON was wrongful. As the applicable Policy did not permit termination in such a way, it follows that the Respondent’s letter dated 15/03/23 did not lawfully bring the contract to an end. The result is a repudiatory breach of contract, for which the Claimant is entitled to damages for wrongful dismissal.
In assessing damages for wrongful dismissal involving a breach of a contractual term requiring notice of termination to be preceded by the completion of a procedural requirement, the common law rule is that, in addition to the notice period, the employee is also entitled to compensation for the period which would have had to elapse before the employer could have lawfully dismissed the employee, i.e., the Gunton extension.
That is consistent with the manner in which the claim was argued in the Employment Tribunal and the appeal in the EAT.
The respondent accepted that the immediate termination was a wrongful dismissal and contended that the least burdensome mode of termination would have been for the respondent to have dismissed the claimant with five weeks’ notice on 15 March 2023.
In response the claimant contended that the termination was ineffective. He sought to rely on Geys v Société Générale [2013] I.C.R. 117. That is inconsistent with his claim which always was that he was dismissed on 15 March 2023. That was given as the date of the end of his employment in the claim form. In the particulars of claim he stated that he was employed “from 23/01/23 until 15/03/23, when he was wrongfully dismissed”. It is not open to the claimant to run this new argument on appeal.
I accept the claimant’s contention that it is necessary to assess when he could have been lawfully dismissed. In Gunton Brightman LJ held 473B-D:
An employee’s remedy, if he is unlawfully dismissed by his employer, is damages. He cannot obtain an order for specific performance because it is not available to compel performance of a contract of service against an unwilling employer. He cannot sue for his salary or wages as such. By necessity his remedy is confined to damages. An unlawful dismissal is ex hypothesi a premature dismissal. The damages recoverable, having regard to the plaintiff’s duty to mitigate his damages, are the moneys needed to compensate the plaintiff for his net loss of salary or wages during the period for which the defendant was bound by his contract to employ the plaintiff. In the case of a fixed term contract, the assessment will extend over that fixed term. In the case of a contract terminable by notice, the assessment will extend over the period which would have had to elapse before the defendant could lawfully have dismissed the plaintiff: see McGregor on Damages , 13th ed. (1972), paras. 884 to 888.
He went on to hold at 475D
As indicated, I am of the view that the relationship of master and servant was broken on January 14, 1976, but that this did not deprive the plaintiff of his contractual right to be protected from a notice of dismissal for an alleged disciplinary offence before the contractual disciplinary procedures had been duly completed.
The Court of Appeal held that damages for wrongful dismissal, where a dismissal is on grounds of misconduct and there is a contractual disciplinary procedure, can include in addition to notice monies, damages for the period it would have taken to operate the disciplinary procedure.
The respondent did not argue that the principle in Gunton no longer applies, an issue that has been subject of discussion in Harvey on Industrial Relations and Employment Law; the learned editor concluding that the principle still applies. The respondent contended that it was entitled to dismiss the claimant with five weeks’ notice in accordance with the probation clause in the contract of employment and paragraph 2.1.2 of the Probation Policy.
In Mackenzie v AA Ltd (formerly AA plc) and another [2022] EWCA Civ 901, [2022] ICR 1362, Bean LJ reviewed the relevant authorities on the assessment of damages for wrongful dismissal:
The original and classic statement of the “least burdensome” rule is to be found in remarks of Maule J, sitting as a member of the Court of Common Pleas, in Cockburn v Alexander (1848) 6 CB 791:
“the question upon a breach of the contract is, what is the condition in which the plaintiffs would be if the defendant had performed the contract. Generally speaking, where there are several ways in which the contract might be performed, that mode is adopted which is the least profitable to the plaintiff, and the least burthensome to the defendant.”
Similarly, in Robinson v Robinson (1851) I De GM & G 247 Lord Cranworth, giving the judgment of the Lords Justices in Chancery, said, at p 257:
“Where a man is bound by covenants to do one of two things and does neither, there [is] an action by the covenantee the measure of damages is in general the loss arising by reason of the covenantor having failed to do that which is least, not that which is most, beneficial to the covenantee …”
By the time this court came to decide Lavarack [1967] 1 QB 278 more than a century later the rule was well established. In that case Diplock LJ accepted as correct the principle (stated by Scrutton LJ in Abrahams v Herbert Reiach Ltd [1922] 1 KB 477) that in an action for breach of contract “a defendant is not liable in damages for not doing that which he is not bound to do”. He said that the principle expressed by Maule J in Cockburn v Alexander was one of the most firmly established applications of this general rule, and noted that each member of the court in Abrahams v Reiach had “explicitly accepted as beyond argument the correctness of the rule expounded in Cockburn v Alexander”.
Diplock LJ continued at [1967] 1 QB 278 , 294B–G:
“The general rule as stated by Scrutton LJ in Abrahams v Reiach, that in an action for breach of contract a defendant is not liable for not doing that which he is not bound to do, has been generally accepted as correct and in my experience at the Bar and on the Bench has been repeatedly applied in subsequent cases. The law is concerned with legal obligations only and the law of contract only with legal obligations created by mutual agreement between contractors—not with the expectations, however reasonable, of one contractor that the other will do something that he has assumed no legal obligation to do. And so if the contract is broken or wrongfully repudiated, the first task of the assessor of damages is to estimate as best he can what the plaintiff would have gained in money or money’s worth if the defendant had fulfilled his legal obligations and had done no more.
“Where there is an anticipatory breach by wrongful repudiation, this can at best be an estimate, whatever the date of the hearing. It involves assuming that what has not occurred and never will occur has occurred or will occur, i e that the defendant has since the breach performed his legal obligations under the contract, and if the estimate is made before the contract would otherwise have come to an end, that he will continue to perform his legal obligations thereunder until the due date of its termination. But the assumption to be made is that the defendant has performed or will perform his legal obligations under his contract with the plaintiff and nothing more. What these legal obligations are and what is their value to the plaintiff may depend upon the occurrence of events extraneous to the contract itself and where this is so, the probability of their occurrence is relevant to the estimate.”
Russell LJ said at p 298E–G:
“A plaintiff in an action for damages for wrongful dismissal can rely only on the fact that the defendant was obliged to carry out the contract sued upon. His prospects in terms of money or money’s worth resulting from the carrying out of the contract may be conditioned by the estimated impact of external events on the results of the carrying out. But it has never been held that the plaintiff can claim any sum on the ground that the defendant might after the repudiation date have voluntarily subjected himself to an additional contractual obligation in favour of the plaintiff. That is not the law nor, with respect, do I think it would be in accord with the sense of the matter so to hold an employer whose attitude to the employee has reached the stage that he is prepared to sack him out of hand is, to say the least, an unlikely source of future generosity.”
The least burdensome performance rule has been regularly applied in commercial disputes where contracts of sale or carriage commonly provide for a margin on the quantity of goods at the option of the defaulting party. In such cases it has been regarded as settled principle for over a century (see In re Thornett and Fehr & Yuills Ltd [1921] 1 KB 219) and applied as ratio in numerous cases, including at the highest level (see, for example, the cross appeal in Bunge Corpn, New York v Tradax Export SA, Panama [1981] 1 WLR 711 , 731B–C).
The rule was cited with approval by Lord Hoffmann in the Judicial Committee of the Privy Council in Lion Nathan Ltd v C-C Bottlers Ltd [1996] 1 WLR 1438 in the following terms, at p 1446:
“In order to compensate the plaintiff for what he has lost, the court must in such cases determine what benefits the plaintiff would have derived from the performance by the defendant of his outstanding obligations under the contract. It is well settled that the court will assume that the defendant would have performed those obligations in the way least onerous to himself … All this makes perfectly good sense when damages depend upon a prediction of how the defendant would have performed outstanding contractual obligations which gave him a choice of what to do.”
In the Supreme Court in Geys v Société Générale, London Branch [2013] ICR 117; [2013] 1 AC 523 Lord Wilson JSC referred, at para 64, to the:
“application of the ‘least burdensome’ principle, namely that damages should reflect only the losses sustained by the employer’s decision to repudiate the contract unlawfully rather than by his having hypothetically proceeded, in the manner ‘least profitable to the plaintiff, and the least burthensome to the defendant’, to terminate the contract lawfully: see Cockburn v Alexander (1848) 6 CB 791, 814 (Maule J) , and McGregor on Damages , 18th ed (2009), para 8-093. So, where under the terms of the contract it had been open to the wrongfully repudiating employer to have taken a course which would have terminated the contract quickly as well as lawfully, the damages will be small.”
In the present case Mr Mackenzie’s contract of employment with AADL could be terminated in one of three ways, other than by mutual consent: by either side giving the other notice (in this contract 12 months’ notice) to terminate at the end of that period; by immediate termination with a payment in lieu of notice; or by summary dismissal if the facts justified it. In the context of contracts of employment I find it difficult to imagine a clearer case of the application of the rule than where the contract expressly gives the employer a choice between dismissal with a requirement that the employee works out his notice and dismissal with payment in lieu of notice. The whole point of a PILON clause is to give the employer that choice and to avoid the argument that dismissal with pay in lieu is a repudiation.
The position is less clear cut where an employer is under a single contractual obligation involving a discretion which the contract requires him to exercise in good faith. This has led to differing outcomes in cases about bonuses. In Lavarack [1967] 1 QB 278 itself there had been a bonus scheme in force at the time of the plaintiff’s dismissal in July 1964. The following year the defendants discontinued the bonus scheme, which they had no contractual obligation to maintain. Diplock LJ said at p 297C:
“In the present case if the defendants had continued their bonus scheme, it may well be that upon the true construction of this contract of employment the plaintiff would have been entitled to be recompensed for the loss of the bonus to which he would have been likely to be legally entitled under his service agreement until its expiry. But it is unnecessary to decide this. They were under no contractual obligation to him to continue the scheme and in fact it was discontinued. His legal entitlement under the contract on which he sues would thus have been limited after 31 March 1965 to his salary of £4,000 per annum. And there, in my view, is the end of the matter. I know of no principle upon which he can claim as damages for breach of one service agreement compensation for remuneration which might have become due under some imaginary future agreement which the plaintiffs did not make with him but might have done if they wished. If this were right, in every action for damages for wrongful dismissal, the plaintiff would be entitled to recover not only the remuneration he would have received during the currency of his service agreement but also some additional sum for loss of the chance of its being renewed upon its expiry.”
Lavarack is to be contrasted with the later decision of this court in Horkulak v Cantor Fitzgerald International [2005] ICR 402. In that case it was found as a fact by the trial judge ([[2004] ICR 697, Newman J) that the defendant had repudiated the claimant’s contract of employment and was liable for loss of what was described as a discretionary bonus. On appeal to this court Potter LJ said, at para 68:
“Clause 3(b)(ii) embodies a scheme designed to confer a contractual benefit on the employee, … [which] is to be administered rationally and in good faith. The company is not free to choose from a ‘range of reasonable methods’ of performance. There is only one method of arriving at a decision: that is, negotiation, followed (in the absence of mutual agreement) by a decision by the president of the parent body. The fact that the final decision is to be made by someone other than the employing company, or its officers, emphasises the objectivity of the process. It seems to us implicit that the president will pay due regard to the interests of both employer and employee, rather than simply to that of achieving the ‘minimum burden’ for the company. The task of the court is to put itself in his shoes.”
In Durham Tees Valley Airport Ltd v bmibaby Ltd [2011] 1 All ER (Comm) 731 it was held that where a contract imposed a single obligation, rather than alternative obligations, and gave a party discretion as to how to perform that obligation, the assessment of damages for the breach of the contract should not be limited strictly to what was the minimum level of performance required by the contract. The court had to conduct a factual inquiry as to how the contract would have been performed had it not been repudiated. Patten LJ, after referring to the judgments in this court in Abrahams v Herbert Reiach Ltd, emphasised at para 69 the difference between “alternative methods of performance” cases and those where “there is only a single obligation to be performed”. The Durham Airport case was in the latter category.
An important decision to which Mr Mansfield drew attention as demonstrating what he says is the anomalous position of the rule is Rigby v Ferodo Ltd [1988] ICR 29. In that case the claim was for failure to pay wages due under a contract of employment. The employers had issued a communication to their staff informing them of a reduction in pay with effect from a particular date. They did not take steps to dismiss the employees concerned. The employees did not accept the reduction but continued to work under protest. Since an unaccepted repudiation by one party is (in the traditional phrase) “a thing writ in water”, and the employers took no steps to exclude the employees from the premises or to terminate their contracts, the employees could simply bring a common law claim for the money due to them. The fact that the employers could have lawfully terminated the contracts of employment by giving proper notice was irrelevant. This case has nothing to do with one where the employer does terminate the contract and chooses to do so by the less burdensome of two lawful methods.
In my view the cases in which there is a single obligation with a range of ways in which it can be performed do not detract from the force and clarity of the rule in cases involving alternative methods of performance of a contract, and in particular alternative methods of termination of a contract of employment. I do not accept the argument that the rule is unsound and contrary to principle. In any event, it is simply not open to this court to depart from a consistent line of authority going back 150 years, and recently cited with approval at the highest level.
In permitting the appeal to proceed Judge Bowers asked the rhetorical question “what is the purpose of the procedural protections if the contract can be terminated by notice in any event”. As the respondent points out one could equally ask what is the purpose of a specific provision allowing notice of five weeks during the probation period if the respondent is always contractually required to keep the employee in employment until both probation assessments have been conducted over a period of at least 6 months (unless timeframes can be reduced by operation of paragraph 1.5 of the Probation Policy).
The answer may lie in the fact that the Probation Policy gives an opportunity for both parties to decide whether the employment is likely to work out during the probation period. It might quickly become apparent that the employment will not work out, in which case either party could give five weeks’ notice.
The probation assessment process within the Probation Policy is designed to deal with underperformance. If underperformance is the only reason why the respondent wishes to terminate the contract it is arguable that would require the probation assessment process to be completed and that, by application of the Gunton principle, damages for wrongful dismissal could include compensation for the period of time the probation assessment process would have taken. But that is not this case, and so I do not need to determine the point.
This was not a case in which the claimant was underperforming and both parties wished to work together to improve his performance. At the date of the termination of the claimant’s employment both parties had concluded that the working relationship was untenable. In those circumstances I consider that, in accordance with Jafri v Lincoln College [2014] EWCA Civ 449, [2014] IRLR 544 there is only one permissible answer; the Employment Tribunal should have held that the claimant was wrongfully dismissed but there was no entitlement to compensation because the claimant would have been dismissed with five weeks’ notice on 15 March 2023 had the respondent adopted the least burdensome manner of lawfully terminating the claimant’s contract, in circumstances in which neither party wanted the contract to continue. He has been paid the salary that would have been due in that period. There was no scope for an ACAS uplift because no compensation would have been awarded.