Edwards v Chesterfield Royal Hospital NHS Foundation Trust

This is the Claimant’s appeal from the decision of District Judge Jones on 25^th March 2009. He held that the Claimant’s damages for wrongful dismissal could not exceed the income that the Claimant would have earned during the three month notice period which the Defendant NHS Trust could have given to bring his employment to an end. He made that order on the Defendant’s application to strike out the Claimant’s claim for damages above that amount or for summary judgment dismissing the Claimant’s claim for more. He also gave the Claimant permission to appeal. The issue for me is therefore whether it was right that the Claimant had no realistic prospect of recovering a greater amount or whether there was some other reason why the Claimant should have been allowed to take the larger claim to trial.

The Claimant was appointed as a Consultant Trauma and Orthopaedic Surgeon at the Chesterfield Royal Hospital in 1998. The Defendant was formed in January 2005 and it then became his employer. In late 2005 allegations were made that the Claimant had undertaken an internal vaginal examination of a woman patient in the Hospital’s A&E Department and then denied that such an examination had taken place. A disciplinary hearing was held on 9^th February 2006, following which the Claimant was dismissed for gross professional and personal misconduct on 10^th February 2006. He appealed, but, as he was told on 2^nd May 2006, the appeal was dismissed.

The Claimant alleges that the Defendant followed the wrong disciplinary process. He says that it should have followed the procedure in a Health Committee Circular HC(90) 9. This would have entitled him to a panel which would have included a clinician in the same medical discipline as himself and chaired by a legally qualified member. He would also have had the right to legal representation. These rights, he says, derive from clause 13 of his contract which provided:

The Defendant denies that it used the wrong procedure. Its Defence pleads in the alternative that the Claimant waived his right (if that is what it was) to a different procedure and/or acquiesced in the Trust’s procedure by participating in the disciplinary hearing and subsequent appeal. Neither the District Judge nor I have to resolve these disputes, because the Defendant accepted that for the purposes of the present application and appeal, I should assume that the Claimant’s assertions in these matters may prove to be correct.

I should mention two other matters as part of the background to this appeal. The first is that the same allegations were considered by the General Medical Council as a potential matter of professional misconduct. In March 2007 the GMC Investigation Committee summarily dismissed them and decided that no further action needed to be taken.

The second matter is that the Claimant did initially bring a complaint of unfair dismissal before an Employment Tribunal on 15^th May 2006. However, on 25^th July 2006 the Claimant withdrew the Tribunal proceedings and on 17^th August 2006 on the Defendant’s application they were formally dismissed.

Ms O’Rourke QC on behalf of the Appellant contends that the Trust could only pursue its complaint of unprofessional conduct against him by means of the properly constituted disciplinary procedure. It could not subvert that process by having recourse to the power to terminate the contract under clause 8 which said “The employment is subject to three months notice on either side.” She argues that the proper reconciliation of clauses 8 and 13 is that the latter prescribed the only process for terminating the contract of employment for reasons of professional (or personal) misconduct. Clause 8 was confined to termination of the employment for other reasons. The decision of the House of Lords in Skidmore v Dartford and Gravesham NHS Trust [2003] ICR 721 emphasised the importance of a proper scrutiny and investigation of allegations of professional misconduct. For senior doctors in particular, dismissal on these grounds was particularly serious ‘since a specialist who has been dismissed from an NHS post on professional grounds would be unlikely to find alternative employment elsewhere.’ (see ‘Disciplinary Procedures for Hospital and Community Doctors and Dentists’ Joint Working Party Report August 1988 quoted in Skidmore at [13] and see [20]). In the first place the employer would have to decide which procedure to invoke. However, its decision had to comply with the terms of the contract. Accordingly, if this was challenged in proceedings for unfair dismissal, it would be for the Tribunal to decide whether the correct contractual procedure had been followed. Ms O’Rourke submits that Skidmore establishes that where there are allegations of professional misconduct, the employer must use the contractually required disciplinary procedure. This leaves no room for the operation of clause 8 of the contract. A contract breaker is entitled to have damages assessed on the basis that he would have chosen the least burdensome of any options to him. However, she submits, he can only invoke options which are lawfully open to him. The Defendant in the present circumstances could not lawfully have terminated the contract under clause 8 in circumstances where the reason for termination was an allegation of professional misconduct. She also relies on two first instance decisions where doctors have obtained interim injunctions to prevent their health authorities implementing summary dismissal decisions before the contractual disciplinary procedures had taken place - Kircher v Hillingdon Primary Care Trust [2006] EWHC 21 (QB) – David Foskett QC, and Gryf-Lowczowski v Hinchingbrooke Healthcare NHS Trust [2005] EWHC 2407 (QB) – Gray J.

She argues additionally, that the Claimant is entitled to compensation which will put him (so far as money can do so) in as good a position as if the contract had been performed. This leads her to submit that the Appellant is entitled to plead, and an opportunity to prove, that, if there had been a properly constituted disciplinary procedure, the allegations of professional misconduct would not have been established. She points to the summary dismissal of the same allegations by the GMC Investigating Committee to show that there is solid support for the likelihood of the Appellant being able to do this.

Ms O’Rourke therefore argues that the District Judge was wrong to cap the Claimant’s damages for wrongful dismissal to 3 months income. The Schedule attached to the Particulars of Claim claims past losses of some £478,474 and future losses in excess of £3.8 million. In her words these are ‘eye-watering’ sums but they represent vividly what the Claimant has lost by the Defendant’s breach of contract – namely his whole career. The adoption of the wrong procedure would have assisted him to show that the dismissal was unfair as well as wrongful (if the Employment Tribunal proceedings had been continued) but the statutory limit on damages for unfair dismissal would nowhere near compensate him for his true loss.

She put forward an alternative position. In Gunton v Richmond-upon-Thames LBC [1980] ICR 755 the Court of Appeal had been faced with an employee who also had a contractual disciplinary procedure. The employer had not followed that procedure. The Court held that the employee was entitled to damages representing the salary he would have earned if the procedures had been followed and then during the one month’s notice period on which the employment could have been terminated. Ms O’Rourke’s alternative position, therefore, is that the Appellant should likewise be entitled to damages for the period during which the proper disciplinary process in his case would have taken plus the three months notice that the Trust would (on this basis) have had to give.

In any case, Ms O’Rourke submits, the Claimant’s argument did have a realistic prospect of success and, therefore, the District Judge should not have granted summary judgment.

Mr Sutton on behalf of the Respondent argues that the District Judge was right: the maximum which the Appellant can recover for wrongful dismissal is the income he would have earned during the three month notice period. He submits that this is a conventional application of the principle in Laverack v Woods of Colchester Ltd [1967] 1 QB 278 i.e. ‘the first task is to estimate…what the Plaintiff would have gained … if the defendant had fulfilled his legal obligation and had done no more.’ He argues that Gunton is a good example of this. At first instance the judge had ordered an inquiry as to damages on the basis that the Plaintiff was entitled to remain in the council’s employment until retirement age unless in the meantime liable to redundancy or dismissal under the disciplinary procedure, allowance being made for the plaintiff to mitigate his loss. Broadly speaking, Mr Sutton said, that was what the Claimant was arguing for in the present case. However, the Court of Appeal varied this order in the way that I have mentioned in the course of summarising Ms O’Rourke’s alternative submission. Mr Sutton submitted that Gunton supported three propositions:

The Court did not contemplate an investigation into what the outcome of any disciplinary proceedings would have been. Nowhere does the Court of Appeal say that the employer’s right to give one month’s notice to terminate the contract at their conclusion was dependent on those proceedings upholding the allegations of misconduct.

Correspondingly, nowhere did the Court suggest that the Claimant would have been entitled to greater damages if he could show that the disciplinary proceedings would have ended in his favour.

The Gunton extension to the period of notice (i.e. the additional period it would have taken for the disciplinary proceedings to be concluded) was dependent on the Plaintiff having not accepted the employer’s repudiatory breach of contract. By contrast, Mr Sutton observes, the present Claimant pleads in the Particulars of Claim that his contract of employment came to an end on 10^th February 2006. In consequence, he is not entitled to the Gunton extension which, in any event, has not been pleaded.

In my judgment, the power to terminate the contract of employment on 3 months notice is of relevance. I agree with Mr Sutton that Gunton supports the first two propositions to which I have referred in the previous paragraph. Buckley LJ at p.765 said that the adoption of the disciplinary regulations disenabled the council from dismissing the plaintiff on disciplinary grounds until the procedure prescribed by those regulations had been carried out. However, once that disciplinary process had been completed the council could have given notice and brought the contract of employment to an end. Indeed, it was in this respect that the Court of Appeal differed from the judge at first instance. I see no reason why the same analysis should not be applied in the present context.

Similarly, it seems to me that Gunton is a short answer to Ms O’Rourke’s argument that the Claimant should have the opportunity to prove that he would have been successful in any properly constituted disciplinary proceedings. In the case of Focsa Services (UK) Ltd v Birkett [1996] IRLR 325 the EAT chaired by Judge Clark said,

This decision was followed in Janciuk v Winerite Ltd [1998] IRLR 63, another EAT case, this time chaired by its President Morison J. He said at [8],

I respectfully agree with what Judge Clark and Morison J. said in these decisions.

There is further support for the District Judge’s conclusion in the judgment of Gray J. in Gryf-Lowczowski. He, it will be recalled, was dealing with an application for an interim injunction to prevent the Defendant dismissing the Claimant until disciplinary proceedings had been completed. One of the issues which the Judge had to consider was the adequacy of damages as an alternative remedy. He said at [76]

Gray J.’s judgment was followed in this respect by David Foskett QC (as he then was) sitting as a Deputy Judge of the High Court in Kircher at [76]. It is true that both Gray J. and Mr Foskett also considered that a claim for damages would deprive the Claimants of an opportunity to clear their names. However, in my view, in both cases this was viewed as an additional reason, over and above the limit on the scale of compensation, as to why an action for damages would not have been an adequate remedy.

Ms O’Rourke drew attention to what Hale LJ (as she then was) had said in Saeed v Royal Wolverhampton NHS Trust [2000] Lloyd’s Rep Med 331. This was another case (like Skidmore) where the issue arose as to what if any role the Court or Tribunal had in reviewing a Trust’s decision to use one disciplinary procedure rather than another. She said at [12]

Ms O’Rourke submitted that if the Defendant was correct, it would be a licence for employers with similar contractual disciplinary procedures (and NHS Trusts in particular) to ignore them because that would be much cheaper than following processes that could be lengthy and expensive. I was not entirely sure how this argument fitted into the analysis which contract law obliges me to follow, but in any case I do not accept it. In the first place, a failure to follow the correct disciplinary procedure is liable to make the dismissal unfair and attract compensation within the statutory framework. It is true that the statutory cap on such damages may not provide full compensation but in both Johnson v Unisys Ltd [2003] 1 AC 518 and Eastwood v Magnox Electric plc [2005] 1 AC 503 the House of Lords was unwilling to develop the common law to address what were alleged to be shortcomings of the statutory employment rights. Secondly, if an employee moves sufficiently swiftly he may be able to obtain an injunction to prevent a dismissal being implemented where there are good grounds for alleging that the employer has failed to invoke a relevant disciplinary procedure. Gryf-Lowczowski and Kircher are examples of where that occurred.

Ms O’Rourke had two other arguments as to why the 3 month notice provision was irrelevant. First, she said that the Defendant had never sought to rely on that power in clause 8 of the contract. In my judgment that argument is misconceived. The elementary purpose of damages for breach of contract is to put the Claimant in as good a position as if the contract had been performed. Where the breach is repudiatory and has been accepted, both parties are discharged from any further actual performance under the contract. The likelihood is, therefore, that the inquiry is hypothetical – it is asking what would have been the position, not what was the position. Likewise the Lavarack principle, which the Defendant invokes here, asks the hypothetical question, what could have the Defendant done to minimise his liability. It is not a pre-condition of relying on Lavarack that the Defendant did in fact take that step.

Ms O’Rourke’s next argument was to submit that the Defendant had not adequately pleaded this case. In paragraph 19 of the Particulars of Claim he had alleged that, if the Defendant had followed the correct procedures, his employment would have been maintained and would have been continuing at the time of the pleading. Ms O’Rourke observes that paragraph 5.1 of the Defence did not admit paragraph 19 of the Particulars of Claim. Had the Defendant wished to advance a case that the Claimant’s contract would have been terminated on 3 months notice under clause 8 of the contract, it should have said so expressly. In my judgment, there is nothing in this point either. Paragraph 6.3 of the Defence pleaded as follows:

Accordingly, I conclude that the power to terminate the contract of employment in clause 8 of that contract is relevant to the present dispute. Subject to what I say below, it does set a cap on the damages which the Claimant can recover for wrongful dismissal. There is no realistic prospect of the Claimant establishing otherwise and no other reason why this matter should go to trial.

This was Ms O’Rourke’s fall back position. Mr Sutton argued that the Gunton extension, as I have referred to it, was not available to the Claimant because:

He had not sought to keep the contract alive. On the contrary, he had treated it as terminated from 10^th February 2006. In Gunton, the Appellant had only been entitled to damages extending beyond the notice period because he had not accepted that the contract of employment had been terminated.

Observations of Lord Hoffman in Johnson suggest that contractual disciplinary procedures may be intended to affect the issue of whether a dismissal is fair, but they were not intended to affect the common law power to dismiss without cause on giving the usual contractual notice period.

This was not the way he had pleaded his case, nor had it been argued on this basis by the Claimant before the District Judge, or in the Notice of Appeal, or in the Appellant’s skeleton argument.

I did not find any of these arguments to be convincing. I shall consider them in turn.

It is true that in Gunton Buckley LJ and Brightman LJ found that a repudiatory breach of a contract of employment by the employer did not automatically bring the contract to an end. In other words, they held that employment contracts were no different from other contracts in this respect. However, their comments were in the context of a claim where the Plaintiff alleged that the council’s letter of dismissal was of no effect and did not determine his contract of employment. The Judge made a declaration to that effect. Buckley LJ, it is true, said at p. 773

This conclusion also seems to me to fit with principle. If an employee swiftly accepts an employer’s repudiatory breach, he is entitled to damages whose purpose is to try and put him in as good a position as if the contract had been performed. If the repudiatory breach took the form of summary dismissal for alleged misconduct which ought to have been subject to a contractual disciplinary process, then, had the contract been performed, the employee would have continued to receive his salary while that process was completed and then during the subsequent notice period. These are damages based on the Gunton extension. I cannot see why those damages are dependent on the claimant electing to treat the contract as continuing. I can see that such an election is a necessary condition for a Kircher style of injunction. Unless the contract continues, the employee could not argue that he had a right to insist on the employer performing its obligations. But the type of damages with which I am concerned is not dependent on there being a continuing obligation on the employer’s part to perform its obligations. Rather, as I have explained above, they compensate the employee because the employer has not performed its side of the contract and are intended to put him in as good a position as if those obligations had been performed. It begs the hypothetical question: what could the employer have done in order to reduce its burden? Again, for the reasons which I have given, since the employer’s complaint was one of misconduct, it could only have implemented the disciplinary process before terminating the Claimant’s contract.

Johnson was an attempt by an employee to recover breach of contract damages for loss (principally psychiatric harm) suffered as a result of the manner of the dismissal. The House of Lords said that he could not. The employee tried to rely on various implied terms, particularly a term that the employer would not act so as to damage seriously the relationship of trust and confidence. Most of Lord Hoffman’s speech (with which Lord Bingham and Lord Millet agreed) was directed at analysing why that argument could not succeed. Notably, he thought that it was not open to the courts to develop implied terms which would have the effect of circumventing the conditions and restrictions in the statutory regime for compensation for unfair dismissal. However, at the end of his judgment, Lord Hoffman said this:

Mr Sutton argues that Lord Hoffman’s views would preclude an employee from being able to recover damages for the Gunton extension period since, even if the disciplinary procedure was part of the contract, it was not intended to enlarge the contractual damages to which the employee would be entitled.

In my judgment, though, Johnson does not have this effect. As Lord Hoffman noted, the employee did not rely on the express terms concerning dismissal. While it goes without saying that his observations deserve respect, they were not necessary to resolve the issues which the parties had brought to the House and they were not the outcome of adversarial argument. The type of loss for which the employee in that case was seeking recovery was not income which could have been earned while disciplinary proceedings were pending. Had Lord Hoffman intended to say that such loss was irrecoverable in a contract claim he would have had to consider whether this meant overruling Gunton itself. Gunton was cited in the course of argument but, as can be seen, was not mentioned by Lord Hoffman in this context. In any case, it would seem that the background to the disciplinary code in Johnson was the legislation which also provided for the unfair dismissal regime. As the House of Lords emphasised in Skidmore, the origin and background of the disciplinary procedures for professional misconduct by doctors in the NHS was very particular and had very much in mind the role of the NHS as a monopoly or near monopoly employer of senior doctors.

I am not impressed either by Mr Sutton’s argument that the Claimant cannot recover compensation for the Gunton extension because it has not been pleaded. The pleaded loss is, of course, larger – very much larger. It was the Defendant’s application which contended, as Mr Simms, its solicitor put it, ‘that the claimant’s measure of loss in these proceedings is, at the utmost, the amount of his earnings in the period of three months following his summary dismissal.’ It was for the Defendant to make good that contention if its application was to succeed.

There was brief reference to compensation for the period that the disciplinary procedures would have taken at the end of Ms O’Rourke’s submissions to the District Judge. However, it was her submission that it was for the Defendant to plead that it would have succeeded in being able to dismiss the Claimant and within what time scale. It is fair to note that in his brief judgment the District Judge did allude to this argument when he said,

It is of more significance that the grounds of appeal did not challenge the District Judge’s decision on the basis that he capped the Claimant’s loss at three months income, rather than the time it would have taken the disciplinary process to be completed plus three months. Nor did Ms O’Rourke’s skeleton argument for this appeal canvass that argument. It was raised for the first time (in the context of the appeal) by the Respondent in its skeleton argument where it was noted that the Claimant had not pleaded damages based on a Gunton extension. However, in her oral submissions, Ms O’Rourke did advance that as her fall-back alternative. These matters may be material when I come to consider questions of costs (as to which I have yet to hear submissions), but I do not think that they should prevent Ms O’Rourke raising them or me deciding whether the maximum damages which the Claimant can recover could in principle be extended. Mr Sutton did not suggest that he was unable to deal with the argument. On the contrary, he made full submissions in answer to it.

The application called on the court to determine what was the maximum amount of damages which the Claimant could recover. Mr Sutton argued that if I thought that the maximum amount was rather larger than three months notice pay, I could say so. This would be consistent with the overriding objective of the Civil Procedure Rules. I agree. Equally, in my view, I should so rule even though my view of that maximum is not the way that the Claimant has currently pleaded his case.

I have spoken above of the period for carrying out the disciplinary procedures. In Gunton that was described by Buckley and Brightman LJJ as a reasonable period for the purpose of expeditiously commencing, carrying out and concluding the contractual disciplinary process. In Gunton that period began with the date on which the employer gave the employee notice of dismissal (14^th January 1976). Income which would have been earned during that period was to be added to the income to which the Plaintiff would have been entitled during the contractual notice period. He then had to give credit (a) for income in fact received from the employer and (b) any earnings in mitigation.

In this case the Claimant was dismissed on 10^th February 2006. Mr Sutton argued that the disciplinary proceedings had begun before that (the Medical Director wrote to the Claimant on 22^nd December 2005) and consequently the Gunton extension period should be overlaid on top of that. I did not feel that I could resolve this matter (which anyway affected only about 6 weeks or so) in the absence of a more detailed investigation of the facts which would not have been appropriate on this appeal. The parties may do so at the trial. It is sufficient for present purposes to say that the Claimant’s damages cannot in my judgment exceed at most the income which the Claimant would have earned during the period that the disciplinary procedures under HC(90) 9 would have taken to be completed if they had started on 10^th February 2006 plus the three months notice period, less any income which the Claimant in fact received during this period from the Defendant and less further any income which the Claimant in fact earned in mitigation of his loss.

I reject the principal way in which the Appellant puts his case. The damages which he will be able to recover will not be at large. With one qualification the District Judge was correct to say that they would be limited (at most) to the income he would have earned during the three month notice period. The Claimant has no realistic prospect of establishing the contrary and there is no other reason why this matter should go to trial.

The qualification is that the Defendant could not have given three months notice until after the period that the disciplinary procedure would have taken (always assuming, for the purpose of this appeal, that he was entitled to a disciplinary procedure that was different from the one which was in fact applied). Consequently, the maximum amount which the Claimant could recover is increased by the income he would have earned during the period that that disciplinary procedure would have taken if conducted and completed with reasonable expedition. To that limited extent, the appeal succeeds.

I will invite submissions when this judgment is handed down as to the precise terms of the order and as to costs.