Appeal No.	EAT/1186/96

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 15 September 1998

Before
HIS HONOUR JUDGE J HICKS QC
MR R SANDERSON OBE
MR J C SHRIGLEY

MRS L RASPIN	APPELLANT

UNITED NEWS SHOPS LTD	RESPONDENTS

Transcript of Proceedings

JUDGMENT

Revised

	APPEARANCES

For the Appellant	MR H FORREST
(Representative)
	
For the Respondents	MR A CHOUDHURY
(of Counsel)
Walker Morris
Solicitors
King's Court
12 King Street
Leeds LS1 2HL	

	Judge J Hicks QC:	Mrs Raspin, the Applicant and Appellant in this case, was employed by the Respondents, United News Shops Ltd, from 16 May 1994 until dismissed, the effective date of termination of her employment being 27 April 1996, a little less than two years from the date of commencement.

	The Respondent employer is, as the Tribunal found, a large undertaking with some 680 employees and a chain of shops and those shops have Post Office counters and it was at one of those counters that Mrs Raspin was employed, initially part-time.

	In 1996 the employers became concerned at evidence that some £3,000 to £4,000 was going missing and a security manager engaged by them installed closed-circuit television and reviewed a substantial amount of video footage obtained by those cameras, as a result of which she, the security manager, became suspicious of Mrs Raspin and reported her to the police.

	On 13 April 1996 in consequence of that report Mrs Raspin was arrested and interviewed by the police.  She and the police saw some of the video footage.  She gave explanations of what was to be seen and was released by the police on bail.  To complete the involvement of the police, at some stage, as to which we do not find the date, but after the completion of the disciplinary processes and dismissal by the employers, the police released Mrs Raspin from her bail on the basis that no charges were to be brought, as indeed none was.

	However meanwhile, on 15 April 1996, the employers, through two at least of their managers, conducted what the Tribunal regarded as a disciplinary meeting at which, however, they gave no details of the allegations being made against Mrs Raspin and, therefore, gave her no opportunity of meeting them.  She was, at the completion of that interview, suspended.  Nothing further happened so far as she was concerned until the dismissal itself, which she received on 27 April (that, as I have already said therefore being the effective date of termination) although the letter of summary dismissal was dated 25 April, so that the employers had reached their decision by that date.

	There was then, on 13 June 1996, Mrs Raspin having promptly lodged an internal appeal against dismissal, a disciplinary appeal hearing at which still, as the Tribunal found, no particulars were given to Mrs Raspin of the allegations against her, but her appeal was dismissed and the dismissal confirmed.

	At the hearing before the Tribunal some extracts from the video were shown to the Tribunal and, therefore, inevitably to Mrs Raspin, which was the first time she had seen them.  But there were still, in the Tribunal’s findings, no adequate particulars of the allegations.  Having seen that footage Mrs Raspin gave an explanation of what she saw, which the employer’s witnesses were unable to say was not possible, and the Tribunal had no hesitation in finding that there was no evidence of any impropriety on her part and that the dismissal was, therefore, in breach of contract.  She was entitled contractually to one week’s notice and therefore to one week’s pay as damages for the breach by dismissal and that was awarded to her and there is no appeal against that award or, of course, as is implicit in that, against the finding of wrongful dismissal.

	There was a further allegation that the dismissal was not only wrongful but had occurred in breach of the employer’s own disciplinary procedures, which had contractual force.  The Tribunal found that the disciplinary procedures were indeed contractual and that is not appealed.  They found breach of those procedures which required that the employee, if there was a complaint of misconduct, be informed of the nature of the complaint and such evidence as might exist and be invited to give an explanation, and be warned that serious misconduct might result in summary dismissal if established after investigation and hearing the employee’s version of the matter.

	It was plain that there had been a breach of the requirement of giving Mrs Raspin information of the nature of the complaint and the evidence; that was not disputed at the hearing before the Tribunal.  It was disputed that there had been a breach of the requirement of due investigation, but the Tribunal again had no difficulty in finding that there was a breach of that requirement also and that also is not appealed.

	Having made those findings the Tribunal then awarded further damages for that breach on the authority of the Court of Appeal decision in the case of Gunton v The London Borough of Richmond [1980] IRLR 321.  It is not the subject of any appeal by the employers that that is a proper head of damages and that the amount awarded by the Tribunal under that head for further loss of wages is awarded on the correct principle.  There is a cross-appeal by the employers as to the length of that period, to which we shall come, but that is the extent of the appeal on that point.

	Having made those findings and made those awards, undisputed except, as I have said, to the extent of the length of period for which the additional loss of wages was awarded, the Tribunal then dealt with a submission on behalf of Mrs Raspin that since a proper disciplinary procedure would have taken the progress of events beyond 15 May, the last day of the period of two years required for her to qualify for the protection against unfair dismissal, there should be a further award of damages to reflect the loss caused to her by the deprivation of that opportunity.  That submission was rejected by the Tribunal and against that rejection Mrs Raspin appeals.

	The employers cross-appeal against the finding of the Tribunal that had a proper disciplinary procedure in accordance with the contract been followed that would have taken an additional three weeks beyond 25 April, namely to 16 May which, of course, was a crucial date because that was the first day after the expiration of two years and, therefore, the first day upon which, if unfairly dismissed, Mrs Raspin would have been able to ask the Tribunal to entertain a complaint of unfair dismissal.

	To complete the procedural history I should record that in fact she did make a complaint of unfair dismissal, but it was inevitably, on the dates as I have given them, conceded on her behalf at the outset of the hearing before the Industrial Tribunal that that complaint could not be sustained, so the proceedings before the Tribunal proceeded solely on the claim for common law damages for wrongful dismissal.

	We deal first with the cross-appeal.  Although other grounds are listed in the notice of cross-appeal Mr Choudhury, very fairly and properly, accepted that in substance there was one ground only on which he could and did rely, and that was the ground of perversity.  It is implicit, of course, in that ground that the question is one of fact, as it plainly is, and in our view the criticisms which Mr Choudhury made of the Tribunal’s finding that the process would have carried on to an additional three weeks beyond 25 April, namely to 16 May, come nowhere near satisfying the test which is required in order to entitle this Tribunal to interfere on the grounds of perversity.

	We need say no more about that cross-appeal, because the particular matters upon which Mr Choudhury relied were simply criticisms which, if valid at all, were ones which could be entertained only by an Appeal Tribunal having jurisdiction to deal with appeals on fact, and it is quite apparent from the reasoned decision of the Tribunal that it considered this issue of fact carefully and that its conclusion was entirely within the scope of what was open to it in the exercise of that jurisdiction.

	The appeal by the employee, Mrs Raspin, therefore falls to be decided on the basis of the Tribunal’s finding that the process would have taken an additional three weeks beyond 25 April, that is to 16 May, and it is now conceded by Mr Choudhury that that was beyond the termination of two years of her employment and that a complaint of unfair dismissal on that or any subsequent date could have been entertained by an Industrial Tribunal, if brought.

	The issue therefore is quite simply, that being so - the employers being in breach of the contractual obligation to follow the required disciplinary procedure - and that being the finding of fact, is the loss of opportunity to bring an unfair dismissal claim properly within one of the heads of damage which can be awarded for breach of contract of employment by wrongful dismissal?

	We start, as any consideration of a question as to the measure of damages for breach of contract must, from the well known statement of Baron Park in Robinson v Harman [1848] 1 Exch. 850 at page 855:

“The rule of common law is, that where a party sustains a loss by reason of a breach of contract, he is, so far as money can do it, to be placed in the same position with respect to damages as if the contract had been performed.”

	Mr Choudhury, for the employers, does not dispute that principle, but he referred us to a passage in McGregor on Damages which he submits shows that, in its application to breach of the contract of employment by wrongful dismissal, there are a limited range of categories of loss which can be considered.

	At paragraph 1167 of the 15th Edition, which we understand is not the latest, but we are assured there has been no material change, McGregor says:

“The measure of damages for wrongful dismissal is prima facie the amount that the plaintiff would have earned had the employment continued according to contract, subject to a deduction in respect of any amount accruing from any other employment which the plaintiff, in minimising damages, either had obtained or should reasonably have obtained.”

	And then that is discussed in terms of its relationship with general principle and at paragraph 1168 McGregor goes on:

“Basically the amount that the plaintiff would have earned under the contract is the salary or the wages which the defendant has agreed to pay.  In addition there may be benefits in kind, the value of which must be taken into account [and examples are given].
Where the plaintiff has been entitled to be paid commission on work done or sales effected by him or in relation to the profits made by the defendant in his business, or on orders received from customers introduced by him, this must also be taken into account, provided always that the defendant’s failure to provide the plaintiff with an opportunity to earn the commission constitutes a breach of contract.”

	As to that we are quite clear that those statements, however accurate as a summary of the normal measure of damages for wrongful dismissal, cannot detract from the generality of the principle in Robinson v Harman.  We note that they include the words “prima facie”; this is not advanced by the textbook as being an absolute rule, or as excluding other possibilities in appropriate circumstances and we note also that included, towards the end of the passages which I have quoted, are examples of loss of opportunity, because where there is the opportunity of earning commission or profit-related supplements to pay there can be no simple arithmetical calculation of what has been lost; there must be an assessment by the court or tribunal awarding damages on the probabilities of what would have happened.  It is a loss of a chance, a loss of an opportunity, which is being compensated.

	In our view, therefore, the result simply on principle is to be approached in this way.  By the breach of their contractually binding procedural requirements the employers terminated Mrs Raspin’s employment on 27 April 1996 instead of on or after 16 May 1996.  Regardless of how, on or after 16 May 1996, they might have terminated it; whether lawfully or unlawfully; whether fairly or unfairly; that simply is the earliest date on which it could have happened, had they not been in breach of their procedural obligations.  Part of any comparison between what happened in the event and what would have happened but for that breach is therefore in principle, it seems to us, to take that difference into account.

	What happened was termination at a date when no unfair dismissal claim could be made, that is to say none could be made effectually - there was no jurisdiction to entertain one.  What would have happened cannot be known with certainty, but what is certain is that there would have been jurisdiction to entertain a claim for unfair dismissal.

	As to the factual possibilities, three were canvassed and no-one has suggested any additional possibilities.  They are first that, on or after 16 May, the Respondents would still have dismissed in circumstances in which the dismissal was unfair and would, therefore, have afforded Mrs Raspin a claim for unfair dismissal, not only jurisdictionally but on the facts.  Secondly, that there would have been, on or after 16 May, a dismissal which the employers would be able to establish was fair.  Thirdly, that there would have been no dismissal - perhaps, to be more technically accurate, no dismissal connected with the history with which we are concerned.

	The consequences of those three possibilities are, of course, different.  Had there been a fair dismissal then the comparison between what happened, in the event, and what would have happened, yields no additional loss to Mrs Raspin under the contested head.  She would be left with what the Tribunal in fact awarded her.  Had there been an unfair dismissal, then she would have been entitled to compensation for it.  Had there been no dismissal then she would have had the benefits of continued employment.

	In both the unfair dismissal possibility and the continued employment possibility, therefore, there is a different situation to be compared financially with what actually happened and, therefore, potentially a loss to Mrs Raspin.  The evaluation of a lost opportunity on ordinary principles would involve assessing both what those losses would have been and also the chances that one or other of those events, rather than the no-loss situation in the event of a fair dismissal, would have happened.

	The investigation of those possibilities and the assessment of those figures is not, of course, without a certain degree of complication, the more so, perhaps, because there are three possibilities where sometimes one only has to consider two.  Nevertheless that is an exercise with which both the courts and these tribunals are familiar and it presents no insuperable difficulties.

	That seems to us to be the conclusion to which we would arrive on principle.  Is there any authority which assists in deciding whether that conclusion on principle is right or not?  The parties are agreed that there is no decision, either binding or persuasive, on the precise point, but there are a number of cases which either contain dicta on it or deal with facts which approach more or less closely to those in this case, and those authorities were cited to us.

	The first three cases are relied upon the Appellant employee, Mrs Raspin, for their dicta.  Taking them in order of date, the first is the case of H W Smith v Brindle [1973] ICR 12, in the very early days of Industrial Relations legislation, indeed so early that the issue was whether the dismissal had occurred before or after the Act came into force, the facts being that the employment was determined by notice, the notice being given before the Act came into force but expiring after.  The Industrial Tribunal accepted jurisdiction and made an award.  The National Industrial Relations Court, on appeal, allowed the appeal and the Court of Appeal reversed that decision and restored the decision of the Tribunal, on the basis that the effective date for jurisdictional purposes was the expiration of the notice rather than the date on which it was given.  That point does not concern us, but in the course of his judgment Lord Denning, having reached the decision to which I have just referred, added:

“I would add at this point that I do not think the Act can be got round by wrongfully dismissing a person summarily or by giving him a notice that is too short.  No person should be able to take advantage of his own wrong in that way.  If an employer should try to escape the Act by giving no notice at all, or a notice that was too short, I should have thought that the Tribunal, by means of a claim for wrongful dismissal, ... or by some such way, would see that the employee would get the same compensation as he would have done if he had been given notice of a proper length.”

	That reference to the Tribunal’s dealing with a claim for wrongful dismissal referred to legislation which had not, at that date, been brought into effect and never was, although as it happens there is now legislation enabling Industrial Tribunals (or now Employment Tribunals) to deal with wrongful dismissal, but that is of no consequence - the principle does not depend on which tribunal or court has jurisdiction to deal with wrongful dismissal cases.  It has to do with the question whether, in a claim for wrongful dismissal, one can take account of the fact that an employer has avoided liability for an unfair dismissal claim by foreshortening the contractual period of employment - in that case, of course, by foreshortening notice, but in principle the same considerations would apply to foreshortening employment by failing to comply with contractual disciplinary procedure.  It was, of course, in view of the decision that the Court of Appeal had made, entirely obiter; that is entirely accepted by Mr Forrest in advancing it.

	Then there is the case of Robert Cort & Son Ltd v Charman [1981] ICR 816.  There the employee, at a time when the qualifying period for unfair dismissal jurisdiction was one year, was summarily dismissed on 26 September 1980, his qualifying year not expiring until 14 October.  The Tribunal had held that the employee had not accepted the employer’s breach of contract and that the employment therefore continued for another four weeks, the period of notice to which he would have been entitled, and that he had therefore been employed for the requisite period to give jurisdiction for an unfair dismissal complaint.  On appeal the Employment Appeal Tribunal allowed the appeal and held that on a summary dismissal, albeit in breach or with salary in lieu of notice, the date of dismissal is the date of that summary dismissal, rather than the expiry of the period in respect of which notice should have been given, or in respect of which salary has been paid in lieu of notice.

	On the facts of Robert Cort & Son Ltd there was contractual provision entitling the employer to terminate summarily on paying salary in lieu of notice.  The relevance of that provision was that the employers could perfectly properly have done that, although they did not, but in giving the judgment of the Appeal Tribunal, Browne-Wilkinson J said this, at page 822 A-B:

“... However, he [the employee] may have another remedy.  The dismissal without notice seems to us to be a clear breach of contract.  The measure of damages for such breach may not be limited to one month’s wages but may also include the loss of the right to compensation for unfair dismissal which he would have had if the correct notice had been given.  The employee therefore may not be left without remedy by our decision.”

	That, like Smith v Brindle was obiter, but it is obiter in rather different circumstances, because in Smith v Brindle the employee had succeeded for other reasons and therefore did not need the benefit of the obiter view expressed by Lord Denning.  In Cort v Charman the employee had lost, and any court or tribunal in such circumstances would be careful not to encourage an employee to follow a course which might result in further fruitless expense of litigation, so that one must take it that this remark by Wilkinson-Browne J, which was a direct encouragement to the employee to bring a claim in the courts (as it would then have had to be), would have been carefully considered and made with the utmost sense of responsibility.  It still is only an obiter dictum but in our view it has that added weight.

	The third such case relied upon by Mr Forrest was that of Stapp v Shaftesbury Society [1982] IRLR 326.  There the employee was given one month’s notice of termination of his employment, the expiry of that notice and, therefore, the effective date of termination being such as to make the employee eligible to claim unfair dismissal compensation, because it was apparently over the period of qualifying service, which again was still at that time 52 weeks.

	However, as the result of other events (details of which do not matter) the employers, before the expiry of the notice and before the expiry of the qualifying period, summarily dismissed Mr Stapp, the employee, so that the notice never ran its course and the Industrial Tribunal for that reason dismissed the complaint.  The Employment Appeal Tribunal dismissed the appeal and the Court of Appeal dismissed a further appeal.  So the situation was that, at all three levels, the tribunals and court held that, notwithstanding having already given a notice which expired after the close of the qualifying period, an employer could still effectively determine employment summarily so as to defeat an unfair dismissal claim.

	In the course of his judgment Stephenson LJ, having referred to Smith v Brindle said:

“Mr Widup submits that this case falls exactly within these observations of the Master of the Rolls.”

	And he goes on to deal with that, but at that point reaches no conclusion.  He returns to the matter at paragraph 32 of the report, saying:

“... if the dismissal on 7th February [the summary dismissal] was in fact wrongful, then it is indicated by what the Master of the Rolls said in Smith v Brindle, and even more clearly by what was said by Mr Justice Browne-Wilkinson ... in the case of Robert Cort and Sons v Charman ... that the employee may have a remedy by claiming damages for wrongful dismissal at common law - damages which might include the loss of the right to complain of unfair dismissal which he would have had if he had not been summarily dismissed.”

	And then, without further comment, he simply continues that that does not affect the effectiveness of the summary dismissal as fixing the date of termination of the employment.

	Sir David Cairns also referred to this point, saying at paragraph 40: 

“If there were no reasons to justify summary dismissal, and if by the summary dismissal the employee were deprived of his right to allege unfair dismissal under the 1978 Act, it may well be that in a common law action for wrongful dismissal he could recover damages for the loss of that right, particularly if the summary dismissal had been effected for the specific purpose of depriving him of that right.”

	And he continues that that seems to be the sort of thing that the Master of the Rolls had in mind in Smith v Brindle.

	So one has undoubtedly these three dicta, two in the Court of Appeal and one in the Employment Appeal Tribunal, that loss of opportunity to raise an unfair dismissal complaint may be a possible head of damages for wrongful dismissal - that is to say common law damages.  Those dicta do not envisage the inclusion in contractual damages of a head of loss caused, not by the breach consisting purely of the dismissal itself, but by a separate breach of contract constituted by failure to follow a contractual binding disciplinary procedure.  That head of damages was held to be recoverable in the case of Gunton v The London Borough of Richmond [1980] IRLR 321, relied upon by the Tribunal below, and by another case which followed it:  Boyo v The Lambeth London Borough Council [1995] IRLR 50, both in the Court of Appeal, which are binding on us, were applied by the Tribunal below and, as I have already indicated, as to which there is no appeal.

	In those cases Gunton and Boyo that extended head was, on the facts, confined to additional lost wages, so the present point did not arise.  This case therefore lies at the conjunction of those two lines of authority, one binding and the other merely persuasive.  The question is:  are both applicable, so that this head of damages claimed by Mrs Raspin is recoverable?  We have already expressed our view on the point of principle.  The authorities so far referred to, although not directly in point, in our view support that conclusion.

	The Tribunal’s decision that it could not award such a head of damages is expressed in paragraph 21 of its reasoned decision as follows.  Having referred to the fact that the submission that there was such a head of damages had been made on behalf of the employee, the decision continues:

“That is a submission to which this Tribunal could be attracted.  We have, however, been referred to the recent Employment Appeal Tribunal decision of Focsa Services v Birkett where the Learned Judge makes it clear that tribunals cannot in that situation consider what may have happened had a contractual disciplinary procedure been followed.  The loss is limited to the sums payable to the employee had the employment been lawfully terminated under the contract.  Therefore we are not in a position to award any further compensation to the applicant.”

	It is plain, therefore, that despite the acknowledged attraction of the submission, no doubt in terms of fairness and justice, the Tribunal felt itself bound by Focsa Services v Birkett [1996] IRLR 325 to reject the application.  It is therefore necessary to see what was decided in Focsa Services Ltd v Birkett and what conclusions are to be drawn from it.  That was a case of an employee who was still within his six months’ probationary period, terminable on one week’s notice, on terms of employment which included disciplinary and appeals procedures, and who was dismissed after four months while off work sick, and without any compliance by the employers with the contractual disciplinary procedure.  He telephoned to say that he would be in to work the last three days of his employment but was told not to return and did not do so.

	The Tribunal had found that the effect of the terms of the contract of employment was to give Mr Birkett, the employee, the right not to be unfairly dismissed as a right under his contract, that there had been a breach of that requirement and that damages should be awarded on the same basis as would have been followed by a Tribunal calculating a compensatory award following a finding of statutory unfair dismissal.

	The employers appealed against that decision and the Employment Appeal Tribunal allowed the appeal on the quite straightforward ground, as we understand it, that it is quite impossible to incorporate such a term by implication, certainly on the facts of that case.  They expressed that conclusion, in the judgment by His Honour Judge Peter Clark, as follows:

“The fallacy, in our judgment, in the chairman’s reasoning is to disregard the normal common law rules as to loss in cases of wrongful dismissal.  That loss is limited to the sums payable to the employee had the employment been lawfully terminated under the contract.  Once a dismissal has taken place, as was accepted and found in this case, it is irrelevant to consider what might have happened had a contractual disciplinary procedure been followed.  An employer is entitled to dismiss on contractual notice at common law for whatever reason.
The fact is that Mr Birkett was dismissed.  In so far as he did not receive his full notice, he is generally entitled to damages to reflect the pay during the notice period and no more.  The only exception is where the employment would have been extended by operating the disciplinary procedure [and the Boyo & Gunton cases are referred to].  In this case there is no evidence to suggest that use of this employer’s procedure would have extended beyond the one week’s contractual notice which was given.  Accordingly no additional loss under this head arises.”

	In our judgment the Tribunal here misunderstood the effect of the decision in Focsa Services v Birkett if, as seems clearly to be the case, they regarded themselves as bound by it not to make an award of the kind which they were invited to do.  In the Focsa case no question of approaching the limits of the qualifying period remotely arose.  There was a simple and straightforward attempt by the Industrial Tribunal, which in fact consisted merely of a Chairman sitting alone, to grant unfair dismissal compensation in a case where there was no jurisdiction to do so by the device of importing an implied term which, on any accepted approach to the implication of terms, simply could not be done.  

	The statement that the loss claimable in cases of wrongful dismissal is limited to the sums payable to the employee, had the employment been lawfully terminated under the contract, is expressly made subject in the following paragraph to the exception where employment would have been extended by operating the disciplinary procedure.  Nothing whatsoever is said, because nothing whatsoever was needed or relevant in the Focsa case, about the way in which, in the case of that exception, further damages because of the failure to follow the disciplinary procedure are to be assessed, which is the entire and only point in the present appeal.

	We were therefore clearly of the opinion that the Tribunal was not bound by Focsa and nor are we, either by precedent (which of course does not strictly apply between one sitting of the Employment Appeal Tribunal and another) or indeed by persuasion, because the Employment Appeal Tribunal there was not considering the present point, to reject this application.

	Mr Choudhury, on behalf of the employers, referred us to additional authorities.  The first is the case of Morran v Glasgow Council of Tenants Associations [1998] IRLR 67, where an employee engaged on 8 October 1991 was summarily dismissed on 16 September 1993 - again, therefore, a little short of the two year qualification period for claims for unfair dismissal.  He was entitled to four weeks’ notice but that entitlement was subject, among other qualifications, to the right of the employer to make a payment in lieu of notice, although in fact Mr Morran received neither notice nor pay in lieu.  He sued for damages for breach of contract and argued that if he had been given the notice to which he was contractually entitled his employment would have terminated after the expiration of the qualifying period.  The Sheriff repelled the employer’s plea that that aspect of the case should be excluded from probation which, if I understand the Scottish procedure correctly, means that at that stage the facts had not been investigated but as a matter of law the Sheriff ruled that such a head of damages was in principle recoverable.

	That was appealed and the Court of Session held that that head of damages could not be included.  The matter was dealt with by the Lord President who, in paragraph 7, after referring to the trilogy of cases which I have already cited, Brindle v Smith, Cort v Charman, Stapp v The Shaftesbury Society, went on:

“Mr Truscott [who was counsel for the employers] points out, however, that all of these expressions of opinion were obiter and that, as far as he knew, there was no reported case in which a court had actually made an order of damages for loss of a prospective right not to be unfairly dismissed.  He urged that this court should not be the first to affirm positively that this would be a relevant head of loss in a claim of damages for breach of a contract of employment.”

	The Lord President continued at paragraph 8:

“Despite the fact that counsel for the defenders put this general issue at the forefront of his submissions, we are able to dispose of the appeal on a narrower ground.”

	The basis on which the Court of Session proceeded was the principle, commonly called the principle in Lavarack v Woods, [1967] 1 QB 278, that in an action for breach of contract a defendant is not liable for not doing that which he is not bound to do and that therefore, in assessing damages, the court should assume that the party in breach, if acting lawfully, would have acted (albeit lawfully) as favourably to his own interests as he could and not in a way which would have involved him in any higher liability.

	On that basis the correct assumption in that case was that the employer, if acting lawfully, could and would have availed himself of the right to make a payment in lieu of notice rather than by giving notice to extend the period of employment beyond the qualifying period.  It was on that basis that the Court of Session allowed the appeal and it was against that background that, at the close of his judgment, the Lord President concluded:

“We do not need to express - and therefore do not express - any opinion on the relevancy of such a claim [that is to say the claim for loss of unfair dismissal rights] in a case where the employers do not have a specific right under the contract to make a payment in lieu of notice.”

	So it is quite plain, in our view, that in Morran the Court of Session very explicitly did not deal with the point which is before us.  The fact that in that case the way in which the employer was able to avoid such liability was the assumption that, if acting lawfully, he could have terminated summarily but with payment in lieu of notice, does not seem to us to be a matter which affects our decision, given that here that is not the reason why the qualifying period is exceeded.  In fact, on the contrary, it is clear that the employer has no such escape here because 16 May is, on the Tribunal’s findings, the earliest date on which, without breach of the procedural disciplinary requirements, the contract could have been terminated in any way whatsoever.

	The other case relied upon by Mr Choudhury is Janciuk v Winerite Ltd, [1998] IRLR 63.  There the employee had been summarily dismissed and had been given two weeks’ pay in lieu of notice, although under his contract of employment he was only entitled to one week.  He alleged that he was contractually entitled to the benefit of a disciplinary procedure and, if that procedure had been followed, there was a chance that he would not have been dismissed.  Accordingly his damages for breach of contract should have included compensation for loss of that chance.  The Industrial Tribunal dismissed the claim for damages on the grounds that he had been awarded full compensation for the failure to give him his contractual notice and that, even if he had been contractually entitled to the benefit of a disciplinary procedure, its operation was unlikely to have extended his employment for more than a week.  Since he had been given two weeks’ pay when he was entitled only to one week’s notice he had already been compensated.  It is quite clear that that ground of disposal of the matter, which is perfectly understandable, is one which turns simply on the facts and has nothing to do with the point in the present case.  

	The Employment Appeal Tribunal dismissed an appeal and held that the Industrial Tribunal had correctly assessed the employee’s damages on the basis that he was not entitled to be compensated for the loss of a chance that he might not have been dismissed.  In the course of the judgment Morison J said at paragraph 5 and following:

“It seems to us that the following principles apply.  
(1) Where a contract of employment is terminable upon notice, the measure of damages to which the employee is entitled on summary dismissal is the amount which the employer would have been bound to pay had his contract been terminated lawfully, less any receipts by the employee during that period earned by way of mitigation of his loss.  The employee is entitled to be put into the position he would have been in had the contract been performed.  It is assumed for this purpose that the employer would have dismissed the employee by notice given at the very moment that the summary dismissal was effected.”

	As to that paragraph we note the statement of the principle derived from Robinson v Harman from which, as we agree, discussion and consideration should proceed, and we would understand the reference to the measure of damages as being, like that in MacGregor, one which addresses itself to the normal prima facie situation and is not considering (because it was not before the Employment Appeal Tribunal) the particular question which concerns us.  That judgment continues:

“(2)  When, for the purposes of calculating compensation the court considers what would have been the loss had the contract been performed, the court assumes that the contract breaker would have performed the contract in a way most favourable to himself.  This principle prevents the employee from recovering a windfall payment.  If there were two lawful ways of performing the contract, the employee will be compensated on the basis that the employer will have chosen to perform the contract in the way which was least burdensome to him:  Lavarack v Woods of Colchester Ltd [1977] 1QB 278.  Therefore, in a simple wrongful dismissal case, the court does not ask what might have happened had the employer known that he had no right to determine the contract summarily, and then calculate compensation on a loss of chance basis.  The assumption is that the employer would have chosen to have terminated the contract lawfully at the very moment that he had brought [or sought to bring] the contract to an end unlawfully, in breach of contract.”

	As to that we have already referred to the impact of the Lavarack principle in the case of Morran and drawn attention to the fact that, as we understand it, it is not a principle that makes any difference in this case because, as I have already said, 16 May simply was the earliest date at which the contract could have been terminated, and no question arises of considering whether the employer would have, or could have, acted in some way so as to minimise his liability.  By that date, the jurisdiction to entertain an unfair dismissal claim had arisen.

	The judgment then further continues:

“(3)  Some contracts of employment require the employer to follow a disciplinary procedure before notice of dismissal can be given.  In other words, the disciplinary procedure acts as a brake on the giving of notice.  In such a case, the employer would be acting in breach of contract if he gave notice terminating the contract without first having followed the correct procedure.  The measure of the loss for that breach is based upon an assessment of the time which, had the procedure been followed, the employee’s employment would have continued.”

	That, of course, is a summary of the principle accepted in this case from the Gunton and Boyo cases.  And again continuing:

“Again, that does not require an analysis of the chances that had the procedure been followed the employee might never have been dismissed.  At this stage the court is engaged on a process of quantifying damage suffered by a dismissed employee.  The court is concerned to know what would have happened, contractually, if instead of unlawfully dismissing the employee the employer had not broken the contract, bearing in mind the Lavarack v Woods principle.  For this purpose, the assumption that must be made is that the employer would have dismissed the employee at the first available moment open to him; namely after the procedure had been exhausted.  The court is not concerned to inquire whether the employee would have been dismissed had the contract been performed, but rather for how long would the employee have been employed before the employer was contractually entitled to give notice.  This is on the assumption that the employer has not been accused of acting in bad faith where other principles might apply [and then he refers to Gunton, Boyo and Focsa].”

	Again, following the way in which that is put, the fact simply is that, asking as that passage does what would have happened contractually if instead of unlawfully dismissing the employee the employer had not broken the contract (in respect of the disciplinary procedure) the answer is quite plainly that the employee would still have been in employment on 16 May, so that the jurisdiction to make an unfair dismissal claim would have arisen.  The assessment of a chance or an opportunity is not concerned with anything prior to that, but with the situation which would have followed on and from that date.

	Then the judgment in Janciuk continues:

“For the purpose of this judgment, it is not necessary to consider the circumstances in which, on its proper construction, a right to a disciplinary procedure is a contractual precondition to the giving of notice.  Such procedures will tend to be rare.  In this case, whatever the proper analysis of the procedure, the tribunal was satisfied that it would have held up the giving of notice by no more than one week.  In those circumstances, the employee had been fully compensated.”

	So that paragraph, as we understand it, refers back to and relies on the quite clear finding of fact by the Tribunal that, even if, as the Tribunal puts it, without deciding the matter, the employee had been contractually entitled to the benefit of the disciplinary procedure, its operation was unlikely to have extended his employment for more than one week.  Here we are concerned with a case where, as was found by the Tribunal, and as is not appealed, there was a contractually binding disciplinary procedure.

	And finally the judgment in Janciuk concludes:

“We regard the attempt to introduce the loss of a chance into the calculation of the damages as a heresy and it represents a misunderstanding of the process involved in quantifying a dismissed employee’s damages for breach of contract.  Mr Kibling is seeking to overlay contractual questions with concepts of fairness which, in our view, do not apply.”

	On the facts of that case that was a perfectly understandable comment, but the question before us, as we understand it, is a quite different one, given that without having to make any assessment of chances, and making all allowances for the Lavarack case (insofar as it has any bearing on the matter) there is a finding that, but for breach of the contractually binding disciplinary procedure, the employment would not have been terminated before 16 May.

	In our view, therefore, as we have already concluded in principle, and as none of these authorities in our view in any way gives us reason to doubt, what must be compared for the purposes of assessing damages is the position in which the employee, Mrs Raspin, found herself when dismissed, at a date when she had no right to complain of unfair dismissal, with the position in which she would have found herself had she been dismissed on or after the date at which the right to bring such a complaint arose.  Once one makes that comparison then one is inevitably, in our view, and in a perfectly orthodox way, in a situation where chances have to be assessed, because there is no certainty as to what would have happened had she still been in employment on 16 May, but the possibilities are limited.  Can they then be evaluated?  Some of them would have left her in a better position, and in a way which has not been compensated for by either of the unappealed heads of damage, and we are therefore confirmed in our conclusion that the Tribunal erred in law in rejecting that head of claim.  Nothing in that conclusion is inconsistent with the authorities which were cited to us.

	I should before leaving the matter refer to some further considerations which Mr Choudhury advanced in the course of his submissions that the appeal should be dismissed.  He first referred us to section 97 (2) of the Employment Rights Act 1996 which provides, having in subsection (1) defined the effective date of termination:

“(2)  Where -
(a)  the contract of employment is terminated by the employer, and
(b) the notice required by section 86 to be given by an employer would, if duly given on the material date, expire on a date later than the effective date of termination (as defined by subsection (1)).”

Then, for the purposes of certain other sections, the later date is the effective date of termination.

	The general effect of that is that if less than the statutory minimum notice has been given then the effective date of termination is postponed until that statutory notice would have expired.  Mr Choudhury’s point, as we understand it, is that since the statute makes that limited and very specific extension of the effective date of termination it would be wrong to make, as he submits, the wider extension which would be entailed by acceding to this appeal.

	In our view that is a completely misunderstood point.  The whole basis of this head of claim is that the effective date of termination is not, and was not, and could not be, extended and that is precisely what has caused the employee her loss, as compared with what the situation would have been had the disciplinary procedure been complied with.

	He also draws attention to section 205 of the same Act, which by subsection (1) provides that:

“(1)  The remedy of an employee for infringement of any of the rights conferred by [various sections and parts of the Act, which include a complaint of unfair dismissal] is, where a provision is made for a complaint or the reference of a question to an industrial tribunal, [and such complaint undoubtedly is to be made] by way of such a complaint or reference and not otherwise. 

	Which, of course, confers upon the Industrial Tribunals exclusive jurisdiction to deal with complaints of unfair dismissal, so that such a complaint cannot be made, for instance, to the ordinary courts.

	That in our understanding does not touch the present point.  We are concerned not with a complaint of unfair dismissal but with the right measure of damages in an action, in effect, albeit brought in the tribunal rather than the courts, for damages for breach of contract in the form of wrongful dismissal.  The purpose of that section, we have no doubt, as Mr Forrest submitted, at least includes the elimination of any possible argument that there is a right of action in the courts for breach of statutory duty if the relevant provisions of the Employment Rights Act are not complied with.

	Finally, Mr Choudhury draws attention to the provisions of the Order which extends the jurisdiction of the Industrial Tribunals (as they then were) to deal with claims for wrongful dismissal, the Industrial Tribunals Extension of Jurisdiction Order 1994 Article 7A, which provides a time limit of three months from the effective date of termination of the contract giving rise to the claim for the making of a complaint in the Industrial Tribunal.  We are not entirely sure to what that point goes.  Of course it entails that the time limit for a claim in the Industrial Tribunal is a great deal shorter than the time limit for a claim for precisely the same breach in the courts, but we cannot see how that affects the point with which we have to deal.  

	That disposes of the matters which were submitted to us and none of those additional matters causes us to depart from the conclusion which I have already indicated.  

	The appeal is therefore allowed.  We take it that that being so there can be no question but that the matter will have to be referred to the Tribunal for the assessment of that head of damages in the light of our decision and the reasons we have given, because we are not only allowing the appeal, we have also given some indication of the basis upon which the assessment should be approached.  I take it also, unless there is any submission to the contrary, that this will go back to the same Tribunal, if it can be reconstituted.

	We remit the assessment of damages under that head to the Industrial Tribunal with a direction that, if the members can conveniently be reconvened, it is dealt with by a Tribunal constituted in the same way as before.

Judge J Hicks QC:

EAT/1186/96

I hope the judgment is okay.  Unfortunately, there was a problem with the machine in Court 1, but should from today, 24 September, be okay.

Also, I’m sorry I could not find the authority, McGregor, in the bundle of documents, to check the quotes from the law books.

Iris Pain
24 September 1998