The Development of Common Law - Report Example

On the Proposition: That the decision of the House of Lords in Johnson v Unisys is an unwarranted restriction on the development of the common law implied term relating to mutual trust and confidence. The Case Johnson (A.P.) vs. Unisys Ltd. was decided by the House of Lords on 22 March 2001. The case concerns Mr. Johnson’s dismissal from Unisys, a company he had worked for since 1971, separated from due to redundancy in 1987, re-employed in 1990, and summarily dismissed from in 1994 for irregularities. Mr. Johnson had already successfully pursued a statutory claim against Unisys for unfair dismissal in 1995, and in the instant case filed a claim for damages at common law, claiming in the alternative breach or contract or negligence. He alleged his dismissal was in breach of various implied terms of his contract of employment, mainly the implied term of trust and confidence. The breach of these terms was allegedly due to dismissal without a fair hearing and in breach of the company’s disciplinary procedure. The case was elevated on appeal by Mr. Johnson to the House of Lords, on the issue as to whether or not there was a breach of implied term of trust and confidence which could form a cause of action by Mr. Johnson against Unisys. The House of Lords ruled to dismiss the appeal, upholding in effect the decision in Addis v. Gramophone Co. Ltd. Addis held that at common law, damages for wrongful termination of a contract of employment were limited to economic or pecuniary loss caused by the fact of dismissal, and cannot apply for personal injury suffered by reason of the manner of dismissal. Ratio decidendi Lord Hoffman expressed the opinion that judges must primarily give effect to the policies expressed by Parliament in legislation, and that their role is developing the common law is subsidiary to that. The appellant had already sought and was awarded relief under the statute insofar as unlawful dismissal was concerned. Common law, however, must rely on earlier jurisprudence for basis. Lord Hoffman cited the case of Wallace v. United Grain Growers where it was decided that wrongful dismissal is concerned with the implied obligation to give reasonable notice of intention to terminate, NOT concerning the wrongness or rightness of the dismissal itself. Both employer and employee are entitled to terminate the relationship without cause. Furthermore, An employee cannot recover damages for injured feelings, mental distress or damage to his reputation, out of the manner of his dismissal. (Addis v Gramophone Co Ltd). This does not mean, however, that the employee is left without recourse. In Wallace, it was also stated that the courts could imply an obligation to exercise the dismissal in good faith; that is, while an employer has every right to dismiss an employee, he should be honest with the employee and refrain from untruthful, unfair or insensitive conduct. Damages are, however, recoverable only for loss caused by a breach of contract, not for loss caused by the manner of the breach. (Mahmud v Bank of Credit and Commerce International). Therefore, concludes Lord Hoffman, if wrongful dismissal is the only cause of action, nothing can be recovered from mental distress or damage to reputation, as far as common law is concerned. Contrary opinions The decision of the House of Lords was unanimously held; however, there have been comments by legal practitioners. Reactions have been voiced concerning the overriding weight given the wording of the law than its contextual application, insofar as the decision considered the non-application of the implied term of trust and confidence. Lord Hoffman stated that this term is worded such that it is concerned with preserving the continuing relationship which should subsist between employer and employee. Thus it is inappropriate for use in connection with the way the relationship is terminated. Mahmud is an exception because of the close association between the acts alleged to be in breach of the implied term and the fact of dismissal, giving rise to special problems. In fine, all that an employee could claim for wrongful termination is the salary to which he is entitled pertaining to the period of notice. (Johnson v. Unisys) Pundits are quick to point out that with the Johnson decision, an anomaly was created between the situation wherein an employee suffers physical injury because of unwarranted suspension, and that wherein the physical injury is suffered because of the manner of his dismissal. An employer who, pending an investigation, unreasonably suspends an employee is liable for psychiatric damage arising from a breach of the duty of care or the implied term of trust and confidence. (Gogay v Hertfordshire County Council) On the other hand, based on Johnson, an employee suffering personal injury to his health due to the fact or manner of his dismissal is left without a remedy, except for the rather narrow window provided by Mahmud. Admittedly, even in the Johnson case, there is a gap in the common law which is not addressed by the unfair dismissal legislation, in view of the limits set in legislation – i.e., the statutory cap, and the one-year period of qualifying service. It is thus possible that Johnson would provide an employer carte blanche to exercise his power to terminate an employee whichever way he chooses. The employer might thus be able to deprive an employee not only of his employment, but benefits he might have derived from contractual schemes of income protection, depending upon the language used. Johnson in effect removes any implied restraint on the notice clause. In Johnson, Lord Millett relies on the rule that contractual parties, by their very act, assume the risk of “ordinary feelings of anxiety, frustration and disappointment caused by any breach of contract.” Recent observations view this statement in Johnson as contrary to the holding in Wallace that the employment contract “is not a simple commercial exchange in the marketplace of goods or services.” Thus it is a growing sentiment that the decision in Addis which was upheld in Johnson, that injury to feelings at common law are barred from award of damages, is becoming increasingly anachronistic in the context of the modern employment contract. Johnson as unwarranted restriction on development of common law: Analysis Upon a reading of the case, it is apparent from the facts that there exist difficulties in construing whether the implied term of trust and confidence should be applied in the manner of dismissal, insofar as this case has developed. Lord Hoffman appears justified in his observation that, in the case of Johnson at least: (1) there is a need for experts to relate the causality of his (Johnson’s) psychiatric treatments (valued at £400,000) with the unfair circumstance in which the dismissal took place; and (2) the open-ended nature of the liability of employers violates the rule on balancing the interests of employers and employees. As to the first observation, it is difficult, if nearly impossible, to provide a modicum of standard by which it may be determined that dismissal was the cause of Johnson’s psychiatric problem, which after all admittedly existed prior to dismissal. As to the second observation, as Lord Hoffman stated, common law decides cases according to principle and cannot impose arbitrary limitations on liability because of the circumstances of the particular case. At this point, only statute can lay down limiting rules based upon policy rather than principle. The particular point to be made in Johnson is that, while it appears there is a need to rethink the common law on the duty of trust and confidence in dismissal cases. This appears not to be the case that would aid in this development. The facts appear not to possess or contain the circumstances that may lend convincing new insight into standards or guidelines which the high tribunal may draw, and which in turn may provide guiding principles for lower courts to abide by in subsequent cases. The Johnson case may, in a sense, provide a restriction on the development of common law on the appreciation of implied term relating to mutual trust and confidence, but at this point the restriction may not be called unwarranted, given the facts of the case. References Statutes: Employment Rights Act 1996 Industrial Relations Act 1971 Cases: Addis v Gramophone Co Ltd [1909] AC 488 Gogay v Hertfordshire County Council [2000] IRLR 703 Johnson (AP) v Unisys Limited [2001] UKHL 13 Mahmud v Bank of Credit and Commerce International SA [1998] AC 20, 51 Malloch v Aberdeen Corporation [1971] 1 WLR 1578, 1581 Wallace v United Grain Growers Ltd (1997) 152 DLR (4th) 1, 39 Articles: Barton, C. & Murrel, A. (2007) “New South Wales Supreme Court confirms implied duties of good faith and mutual trust and confidence.” Internet Business Law Services. Retrieved 27 July 2009 from John, S. (2009) “Breaches of the implied term of trust and confidence in constructive dismissal cases where there are mutual breaches – the case of RDF Media Group v Clements [2008] IRLR 207 QB”. Retrieved 27 July 2009 from McMullen J, (2003) “Practice Points: Unfair Dismissal: Time for a Rethink”, Law Society Gazette 100.27(42) Vincent, C. (2006) “The Ten Commandments of Constructive Dismissal.” Dechert on Point. Winter 2006, Issue 2. p. 2 Dechert LLP, London. Books: Davies A C L, (2004), Perspectives on Labour Law, Cambridge University Press Painter R, (2004) Cases and Materials on Employment Law, Oxford University Press Read More