Wilsons Solicitors Llp & Ors v Roberts (Rev 1) [2018] EWCA Civ 52

[2018] EWCA Civ 52Case No A2/2016/1943
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE EMPLOYMENT APPEAL TRIBUNAL
MRS JUSTICE SIMLER P
UKEAT/0339/15
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 26/01/2018
Before
LORD JUSTICE LONGMORELADY JUSTICE HALLETTLORD JUSTICE SINGH
Between
WILSONS SOLICITORS LLP & OthersAppellantsROBERTSRespondent
Jonathan Cohen QC and Craig Rajgopaul instructed by and for AppellantsJames Laddie QC instructed by and for RespondentHearing Hearing date: 20 December 2017
Judgment ApprovedLord Justice Singh :Introduction
[1]This is an appeal from the Employment Appeal Tribunal (“EAT”). For ease of exposition I will refer to the parties as the Claimant and the Respondents, even though this appeal is brought before this Court by the Respondents to the underlying claim.[2]In a judgment given on 21 April 2016 Simler J (President of the EAT) allowed the Claimant’s appeal against the decision of the Employment Tribunal (“ET”) at Southampton, dated 8 November 2015. By that decision the ET had struck out “the element of the Claimant’s claim that relates to his termination of his membership, and the losses that flow from that termination”.[3]The factual background is likely to be contentious in due course. However, because the relevant part of the claim was struck out at a preliminary hearing, for the time being the facts alleged by the Claimant must be assumed to be true.

Factual Background

[4]The Claimant is a solicitor and was a member of the First Respondent, which is a limited liability partnership carrying on business as a firm of solicitors. The other Respondents are some of the remaining individual members of the First Respondent.[5]The Claimant commenced his membership of the firm on 1 May 2008. The First Respondent’s affairs were governed by a Members’ Agreement.[6]At all material times the Claimant held the position of Managing Partner, Compliance Officer for Legal Practice (“COLP”) and Compliance Officer for Finance and Administration (“COFA”). He also sat on the Board of the First Respondent.[7]On 29 July 2014 a complaint of bullying against the First Respondent’s senior partner, a Mr Christopher Nisbet, was received by the Board. The Claimant investigated that complaint and associated compliance issues. He reported his findings to the Board by 30 September 2014 and produced a report on 7 October 2014. That report was due to be discussed at a members’ meeting on 21 October 2014.[8]On 9 October 2014 a majority of the Respondents delivered a notice stating that they would not attend the scheduled meeting on 21 October.[9]On 25 and 26 November 2014 the Respondents demanded that the Claimant should resign from the position of Managing Partner. They then voted to remove him from that post.[10]Later the Respondents removed the Claimant from the positions of COLP and COFA before he was able to submit his report.[11]On 5 January 2015 the Claimant wrote to the Respondents claiming that they had repudiated the Members’ Agreement, and stating that he accepted the repudiatory breaches. He notified them that he was giving one month’s notice of termination of his membership. He said that the Respondents’ conduct towards him had made his continued membership intolerable.[12]On 2 February 2015 the Respondents denied that there had been any repudiatory breaches and rejected the notice which had been given by the Claimant on 5 January. They informed him that they expected him to return to work.[13]By letter dated 5 February 2015 the Claimant rejected the Respondents’ letter of 2 February and confirmed that his membership would cease as of that date.[14]The Claimant did not return to work and on 30 April 2015 he was expelled from the firm by the Respondents.[15]In the meantime, on 4 March 2015 the Claimant had issued his claim against the Respondents in the ET. His claim was for “compensation for detriment suffered by a worker as a result of the making of protected disclosures”, under section 47B of the Employment Rights Act 1996 (“the 1996 Act”). That legislation is commonly referred to as the “whistleblowing” legislation.[16]On 8 June 2015 the Claimant served a schedule of loss, claiming almost £3.4 million. The great majority of the claimed losses were for future loss of earnings.[17]At a preliminary hearing on 2 September 2015 EJ Mulvaney listed a further preliminary hearing to take place on 6 November 2015 to consider the following issue: “Whether the Claimant’s claim that there was a constructive termination of his membership of the Respondent LLP should be struck out as having no reasonable prospect of success in the light of the judgment in the case of Flanagan v Lion Trust Investment Partners LLP and others [2015] EWHC 2171 (Ch)”. [2015] Bus LR 1172[18]At the preliminary hearing on 6 November 2015 EJ Salter considered that issue. He reserved his judgment and sent it to the parties on 9 November 2015. As I have mentioned, he decided that the element of the Claimant’s claim that relates to his termination of his membership and the losses that flow from that termination should be struck out.[19]The Claimant appealed to the EAT on 11 December 2015. As a consequence the proceedings in the ET were stayed and they remain stayed pending determination of the present appeal.[20]The appeal before the EAT was heard by Simler J on 23 March 2016. Judgment was handed down on 21 April 2016. She allowed the Claimant’s appeal and refused permission to appeal to this Court.[21]On 18 July 2016 permission to appeal to this Court was granted by Lewison LJ.

Material legislation

[22]Section 49 of the Employment Rights Act 1996, so far as material, provides: “(1) Where an employment tribunal finds a complaint under section 48 well-founded, the tribunal –(a) shall make a declaration to that effect, and(b) may make an award of compensation to be paid by the employer to the complainant in respect of the act or failure to act to which the complaint relates. (2) The amount of the compensation awarded shall be such as the tribunal considers just and equitable in all the circumstances having regard to – (a) the infringement to which the complaint relates, and (b) any loss which is attributable to the act, or failure to act, which infringed the complainant’s right. (3) The loss shall be taken to include (a) any expenses reasonably incurred by the complainant in consequence of the act, or failure to act, to which the complaint relates, and (b) loss of any benefit which he might reasonably be expected to have had but for that act or failure to act. (4) In ascertaining the loss the tribunal shall apply the same rule concerning the duty of a person to mitigate his loss as applies to damages recoverable under the common law of England and Wales … . ” (a) shall make a declaration to that effect, and (b) may make an award of compensation to be paid by the employer to the complainant in respect of the act or failure to act to which the complaint relates. (a) the infringement to which the complaint relates, and (b) any loss which is attributable to the act, or failure to act, which infringed the complainant’s right. (a) any expenses reasonably incurred by the complainant in consequence of the act, or failure to act, to which the complaint relates, and (b) loss of any benefit which he might reasonably be expected to have had but for that act or failure to act.

The decision in Flanagan

[23]In Flanagan the petitioner was a member of a Limited Liability Partnership (“LLP”). The petition was an “unfair prejudice” petition brought under section 994 of the Companies Act 2006. Mr Flanagan had joined the LLP on 4 October 2011 and claimed still to be a member of it, although his membership had purportedly been terminated by notices of compulsory retirement served on him.[24]LLPs were created as “a new form of legal entity”: see section 1(1) of the Limited Liability Partnerships Act 2000 (“the 2000 Act”), cited at para. 54 in the judgment of Henderson J (as he then was) in Flanagan. By virtue of section 1(2) an LLP is a body corporate, with a legal personality which is separate from that of its members. As Henderson J observed, the corporate body has “members”, not “partners”, even though it is known as a limited liability partnership.[25]Section 4(3) of the 2000 Act provides:
“A person may cease to be a member of a limited liability partnership (as well as by death or dissolution) in accordance with an agreement with the other members or, in the absence of agreement with the other members as to cessation of membership, by giving reasonable notice to the other members.”
[26]Section 5 of the 2000 Act, so far as material, provides:
“(1) Except as far as otherwise provided by this Act or any other enactment, the mutual rights and duties of the members of a limited liability partnership, and the mutual rights and duties of a limited liability partnership and its members, shall be governed – (a) by agreement between the members, or between the limited liability partnership and its members, or (b) in the absence of agreement as to any matter, by any provision made in relation to that matter by regulations under section 15(c).” (a) by agreement between the members, or between the limited liability partnership and its members, or (b) in the absence of agreement as to any matter, by any provision made in relation to that matter by regulations under section 15(c).”
[27]In Part VIII of his judgment in Flanagan Henderson J considered the question: is the common law doctrine of repudiatory breach excluded? He answered that question with his conclusion at para. 243 that the common law doctrine “is implicitly excluded in relation to multi-party section 5 agreements.” The consequence was that Mr Flanagan’s purported acceptance of the breach was of no legal effect: see para. 244(3) in the judgment.

The Judgment of the ET

[28]The judgment of the ET was given by EJ Salter sitting alone.[29]Since the issue was heard at a preliminary hearing, the ET assumed the facts alleged by the Claimant to be true. It addressed the application as a pure question of law: see para. 42 of the judgment.[30]The Employment Judge set out what he understood to be the relevant law at paras. 16-24 of the judgment. He included reference to section 47B of the 1996 Act and also section 4(3) of the 2000 Act.

The Judge set out his conclusions on the application at paras. 38-50 of his judgment.

[32]The Judge was of the view that the decision of the High Court in Flanagan presented “an insurmountable hurdle for the Claimant’s case”: see para. 50.[33]At para. 47

the Judge said:

“I have considered whether I can distinguish Flanagan as the Claimant here says I should. The basis on which he asks me to distinguish the case are set out in paragraph 45 of his submissions and consist of the differences he identifies in the jurisdictions, the wrongful acts, the legal wrongs, the remedies and the issues to be considered by the Tribunal. I cannot find any material on which I can distinguish the authority. I accept that in Flanagan the claimant was seeking to remain a member of the LLP (albeit with his relationship with the LLP being governed by the Default Rules) whilst in the matter before me the Claimant was seeking to not be a member of the LLP. This distinction does not, in my judgment, amount to reason to distinguish the decision and set employment law apart from the Civil Courts as to the applicability of the fundamental core principles that govern the relationship of an LLP and its members. Confusion would abound, it appears to me, if the Claimant were right and the member of an LLP was considered to be a member of the LLP for the purposes of litigation in the Civil Courts as there was no repudiation principle applicable, yet the Employment Tribunal system would consider him not to be a member owing to an acceptance of a repudiatory breach.”
[34]As will be apparent from that passage the Claimant represented himself at the ET hearing. The Respondent was represented by Mr Jonathan Cohen (as he then was). Before the EAT the Claimant was represented by Mr James Laddie QC and the Respondents were represented by Mr Jonathan Cohen QC and Mr Craig Rajgopaul. We have had the advantage of submissions from the same counsel before this Court.

The Judgment of the EAT

[35]The EAT allowed the Claimant’s appeal from the ET. Simler J held that an LLP member who is a worker and protected by the whistleblowing provisions in the 1996 Act can claim compensation for post-termination financial losses even if lawfully expelled as a member, provided that he demonstrates that such losses are attributable to the earlier unlawful detrimental treatment. She held that this is a question of fact and judgment to be assessed and determined by the ET on evidence. The ET was therefore not entitled to strike out that element of the claim without hearing evidence or making any findings of fact.[36]Simler J noted that the Respondents had conceded before the ET that the Claimant was a “worker” and therefore protected by the whistleblowing provisions of the 1996 Act: see para. 18 of her judgment.[37]Simler J then set out the material provisions of the 1996 Act, including section 49, which I have quoted earlier.[38]Simler J was of the view that the decision in Flanagan did not resolve the issue in the present case. At para. 28 she said:
“… The fact that the Claimant’s purported resignation was not effective for the purposes of LLP law does not determine the question of what loss was attributable to the unlawful detriments on which he relied.”
Simler J noted that Mr Cohen had submitted that, in a case where there is a lawful termination of LLP membership which post-dates the earlier, alleged detrimental treatment, that termination must be the cause of any post-termination losses and such losses cannot be said to be attributable to the earlier detrimental acts: see para. 29. Simler J rejected that submission. She held that, whilst the Claimant’s purported resignation may have been legally ineffective to bring his membership of the LLP to an end, nevertheless his case was that his position as a member had become untenable and he withdrew his labour because of the grave and unlawful detriments on which he relied. He said that this had led inevitably to his expulsion on 30 April 2015. The Claimant did not contend that his financial losses were attributable to his acceptance of the repudiatory breaches as terminating his membership but put his case on compensation in more general terms. Simler J was of the view that: “If he can demonstrate that the detriments were so serious as to make his position as a member untenable and to prevent him from attending work, I cannot see why he should be barred from making this claim. The question is ultimately one of fact and judgment for the Tribunal and involves no necessary conclusion one way or the other”: see para. 35 of her judgment.[39]In the course of the parties’ submissions, as Simler J observed, a divergence of view had emerged as to whether the test in section 49 (“attributable to”) is the same as the test of causation (“but for”) at common law: see paras. 21-26 of the judgment. Before the EAT Mr Cohen submitted that the statutory test required there to be a “proximate cause” of the loss claimed. Mr Laddie submitted that the statutory test imported a classic “but for” test of causation. He submitted, however, that he did not have to succeed on this argument to win his appeal: see para. 23 of the judgment.[40]Simler J was not fully persuaded by either party’s submissions on this point. She took the view that proximity by itself is not the determining factor, though it is obviously relevant: see para. 24. However, she also took the view that a “but for” test did not apply: see para. 25.[41]At para. 26 Simler J said:
“The wording of section 49(2)(b) does not expressly adopt the ordinary common law principles or language of causation. Parliament has chosen to use the word ‘attributable’ instead of cause or caused; no doubt for good reason. Attributable is an ordinary English word that is well understood and is capable of being applied flexibly by tribunals of fact on a broad common-sense basis. The statutory test imposed by section 49(2)(b) provides that in deciding what compensation should be awarded, tribunals have discretion to determine what is just and equitable in all the circumstances. But in exercising that discretion, there are two mandatory considerations: first they must have regard to the infringement itself, in other words the nature and gravity of that infringement; and secondly, they must have regard to the loss attributable to the act or failure to act which infringed the individual’s rights. So the connection that must be established between the infringement and loss is expressed in wider language than that of pure causation, and not in terms of a ‘but for’ approach.”

Grounds of Appeal

[42]The formal grounds of appeal are to be found in a document dated 13 May 2016. According to that document the Respondents appeal to this Court on the following grounds:
“The Employment Appeal Tribunal erred in law in: (1) Finding that an LLP member who acts ‘reasonably’ in withdrawing his labour will not, as a matter of law, act wrongfully or in repudiatory breach of the LLP members’ agreement, and accordingly may be awarded losses flowing from a subsequent expulsion pursuant to the terms of the members’ agreement on grounds that the member withdrew his labour. (2) In any event allowing an appeal against the Employment Tribunal’s decision to strike out the Claimant’s claim for post-termination losses when those losses were suffered as a result of an expulsion from the LLP which was not the subject of any plea of unlawfulness.”
[43]In the Respondents’ original skeleton argument, which was headed “Application for Permission to Appeal”, which is also dated 13 May 2016, the arguments that were advanced were slightly differently worded.[44]First, it was submitted that the EAT’s decision conflicts with the decision of the High Court in Flanagan: see paras. 10-11.[45]Secondly, it was submitted that the EAT decision conflicts with the decision of this Court in Western Excavating (ECC) Ltd v Sharp [1978] ICR 221: see paras. 12-14.[46]The Respondents have also filed a supplementary skeleton argument. It is clear from those documents, as well as the oral submissions made by Mr Cohen and Mr Laddie that the issues before this Court are somewhat broader than might appear from the formal grounds of appeal. I hope to do justice to their submissions if I deal with them by reference to the following issues:(1) Was the ET right to strike out the relevant part of the claim?(2) Was the EAT right to allow the Claimant’s appeal?(3) Does the lawful act of termination break the chain of causation as a matter of law?(4) Was the decision of the EAT inconsistent with the decision of this Court in Western Excavating v Sharp? Discussion (1). Was the ET right to strike out the relevant part of the claim?[47]As I have noted in summarising the factual background, the decision of the ET in this case was to strike out the relevant part of the claim. The ET exercised its power to strike out under rule 37 of the ET Procedure Rules 2013. Those rules are contained in Sch. 1 to the Employment Tribunals (Constitution and Rules of Procedure) Regulations 2013 (SI 2013 No. 1237). Rule 37(1) provides that, at any stage of the proceedings, either on its own initiative or on the application of a party, an employment tribunal may strike out all or part of a claim on any of the following grounds: – “(a) that it … has no reasonable prospect of success; …” The power of the ET to strike out a claim on the ground that it has no reasonable prospect of success was first introduced in rules made in 2004: before then the term used had been that a claim was “misconceived”.[48]The present rule bears similarities to the provisions of Rule 3.4 of the Civil Procedure Rules 1998. Para. (2) of that Rule confers power on the court to strike out a statement of case if it appears to the court:
“(a) that the statement of case discloses no reasonable grounds for bringing or defending the claim; …”
That provision in turn is descended from the old Order 18, rule 19 in the Rules of the Supreme Court 1965, whose origins dated back to the late 19th century. In that context it was well established that the power to strike out should only be exercised in “plain and obvious” cases.[49]It is clear that a claim or relevant part of a claim should only be struck out under this power if, even assuming the facts as pleaded to be true, there is no reasonable prospect of success. Typically this will be so because the facts, even if true, do not give rise to any cause of action as a matter of law. Important though the power to strike out is in appropriate cases, it should be reserved for such cases. Otherwise there is a risk, as has often been observed in the civil courts, that an apparent shortcut turns out to be a long detour.[50]In the present case the reason why the ET struck out the relevant part of the claim related solely to the decision of the High Court in Flanagan. It is clear that EJ Salter considered that that decision precluded the relevant part of the claim as a matter of law. In my judgement it did no such thing. Even accepting the correctness of Henderson J’s decision (I note that the case went on appeal but the point in issue was not pursued by way of cross-appeal before this Court), it did not as a matter of law preclude the relevant part of the claim. The pertinent part of EJ Salter’s reasoning is to be found in para. 50, which I have quoted earlier. There is an important elision in that paragraph because EJ Salter moved seamlessly from “the element of the Claimant’s claim that relates to the termination of his membership” to “the losses that flow from that termination”. The ET struck both of those elements of the claim out. In fact the second element did not necessarily fall along with the first.[51]It is true, as Mr Laddie accepts before this Court, that part of what the Claimant was asserting in his original claim (in the form ET1) was misconceived in the light of Flanagan. It is common ground at least before this Court, as it appears to have been before the EAT, that there can be no concept of “constructive termination” in the context of LLP law. However, the crucial issue was and is whether that necessarily means that the Claimant is barred from pursuing his claim for post-termination losses at all. His case is that the underlying cause of the post-termination losses can be traced back to the pre-termination detriments which he alleges he suffered and which he alleges were in breach of the relevant provisions of the 1996 Act relating to protected disclosures. He may or may not be right in those allegations. However, for the purpose of exercising the power to strike out, the ET correctly appreciated that the facts had to be assumed to be true in the Claimant’s favour. Once that is done, it seems to me inevitable that the claim should not have been struck out. This is because there clearly are matters of fact which need to be explored and that can only be done after the evidence has been heard by the ET at a substantive hearing. (2) Was the EAT right to allow the Claimant’s appeal?[52]For the above reasons the EAT was clearly correct, in my view, to allow the appeal from the ET. It did so on the simple basis that this case was not suitable for the use of the strike out power because there was a question of fact which needed to be determined on evidence.[53]Mr Cohen complains that once the Claimant had accepted (as he did before the EAT), first, that his claim that his membership of the LLP had been terminated by his acceptance of an alleged repudiatory breach was appropriately struck out; and, secondly, that the expulsion by the other members from the LLP was not in itself an act of detriment made unlawful by the relevant provisions of the 1996 Act, his claim for post-termination losses inevitably had to fail.[54]In my judgement the conclusion which Mr Cohen seeks to derive does not follow from those premises. As a matter of law the decision in Flanagan is not determinative of the issue relating to compensation which arises in the present case.[55]Mr Cohen submits that the EAT essentially found that, notwithstanding the decision in Flanagan, an LLP member may still be entitled to cease to comply with a members’ agreement and nevertheless act lawfully. In support of that submission Mr Cohen showed this Court extracts from the latest edition of Lindley and Banks on Partnership (20th ed. 2017), paras. 10-102, 16-07 and 16-08, which are critical of the reasoning of Simler J in the present case. In my view, both the current editor of that book and Mr Cohen have fallen into the trap of assuming that Simler J has decided more than in fact she did. She has not said anything as a matter of law which is inconsistent with Flanagan. The two issues and the two contexts in which they arise are completely different.[56]It is important to go back to the jurisdiction which the ET exercises in cases of this kind under the 1996 Act. In particular section 49 governs the basis on which compensation may be awarded for a breach of the relevant provisions by the ET. The fundamental basis for the exercise of that jurisdiction is that the compensation should be “just and equitable.” As a matter of law the ET is not in fact bound to apply principles of causation which are familiar to lawyers who are steeped in the common law. What the legislation does require is that, in arriving at its decision about whether compensation is just and equitable, the ET must have regard to a number of factors. One of those factors is whether the loss claimed is “attributable to” the breach.[57]As I have said earlier, Simler J expressed the view, at para. 26 of her judgment, that the phrase “attributable to” in section 49((2)(b) of the 1996 Act does not import the common law concept of “but for” causation.[58]Although the outcome of this appeal does not turn on that point, before this Court Mr Laddie maintains the argument he made before the EAT and submits that Simler J was wrong to regard the issue of causation under section 49(2) of the 1996 Act “as unmoored from the general path of the common law”: see para.16 of the Claimant’s skeleton argument. Mr Laddie submits that, in fact, the phrase “attributable to” pithily encapsulates the common law principles governing causation in the context of damages. He observes that that very phrase is used in the summary of the relevant principles of causation which is to be found in Halsbury’s Laws of England, Vol. 29 (Damages) at para. 339(1). I agree with Mr Laddie on this.[59]In my respectful opinion, Simler J confused two different concepts in para. 26 of her judgment. First, there is the question of what “attributable to” means. The second – but different – question is what is the overall function of the ET when it considers an award of compensation under section 49? Simler J was right to observe that the answer to the second question is that the ET has a discretion to determine what is just and equitable in all the circumstances. But that does not answer the first question. One of the things that the ET is required by the legislation to have regard to is what loss is attributable to the act, or failure to act, complained of. That raises the first question, the meaning of “attributable to”. In my view, that phrase does import the common law concept of “but for” causation.[60]However, as Mr Laddie says, this case does not turn on this point. In my view, the crucial part of Simler J’s reasoning can be found in para. 28 of her judgment where she said:
“… The fact that the Claimant’s purported resignation was not effective for the purposes of LLP law does not determine the question of what loss was attributable to the unlawful detriments on which he relied. If the unlawful ‘victimisation’ of the Claimant made his position untenable and led him to withdraw his labour, thereby exposing him to the likelihood of expulsion, it is hard to see why that should as a matter of law (or inevitable fact) be regarded as too indirect or unnatural a consequence to attract compensation in accordance with the statutory test, provided it is satisfied. In the particular circumstances asserted by the Claimant, this seems at least arguably, a natural and likely consequence of the unlawful conduct alleged.”
[61]Later, at the end of para. 32, Simler J said:
“… Whether or not the intervening termination by the LLP (claimed by the Respondents to be in accordance with the Members Agreement, so, on the Respondents’ case lawful although its lawfulness is disputed by the Claimant) brings any loss claim he might otherwise have had, to an end, is a question of fact not law, and does need to be resolved.”
[62]Similarly, at para. 35, Simler J said:
“… Whilst the Claimant’s purported resignation may have been legally ineffective to bring his membership of the LLP to an end, nevertheless his case was that his position as a member became untenable and he withdrew his labour because of the grave and unlawful detriments on which he relied. He says this led inevitably to his expulsion on 30 April 2015. He does not contend that his financial losses are attributable to his acceptance of the repudiatory breaches as terminating his membership but puts his case on compensation in more general terms. If he can demonstrate that the detriments were so serious as to make his position as a member untenable and to prevent him from attending work, I cannot see why he should be barred from making this claim. The question is ultimately one of fact and judgment for the Tribunal and involves no necessary conclusion one way or the other.”
[63]I regard that reasoning by Simler J as being correct. (3) Does the lawful act of termination break the chain of causation as a matter of law?[64]What Mr Cohen then has to submit, and does submit, is that Simler J was wrong to say that the issue is one of fact and not law. At the hearing before this Court Mr Cohen was initially reluctant to accept the suggestion that his argument amounts to a submission that the lawful termination of the Membership Agreement “breaks the chain of causation”. Although Mr Cohen preferred to express his proposition on the basis that it is the termination by the other members of the LLP which alone causes the post-termination loss of earnings, in the end (as I understood him) Mr Cohen did accept that that is what his submission amounts to. He submits that, no matter what the facts after the evidence has been heard, there is only one conclusion to which the ET could properly come in this case because there was the intervening act of (lawful) termination of the LLP Agreement. As the Respondents’ original skeleton argument in this Court put it, at para. 16:
“There is plain authority for the proposition that a lawful termination of a contract of service acts as a stop loss for any damage which might have been suffered as a result of pre-termination unlawful detriments.”
[65]The authorities on which Mr Cohen relies in support of that proposition are, first, the decision of this Court in Prison Service v Beart (No. 2) [2005] EWCA Civ 467; [2005] ICR 1206; and, secondly, the decision of the EAT in Ahsan v The Labour Party (UKEAT/0211/10), a decision of Underhill J, as he then was (the then President of the EAT). I will analyse each of those cases in turn. Prison Service v Beart (No. 2)[66]In Beart the claimant brought a claim for disability discrimination and unfair dismissal before the ET. Both complaints were upheld by the ET. On the complaint of disability discrimination the ET awarded the claimant compensation for future loss of earnings and rejected an argument by the employer that the effective cause of her long-term unemployment was her dismissal and, as a consequence, her damages should be limited to the statutory maximum for unfair dismissal. Both the EAT and this Court dismissed the employer’s appeal.[67]Both Rix LJ, who gave the main judgment in this Court, and Wall LJ, who gave a brief concurring judgment, found it puzzling that “any employer, let alone a public body, could escape liability for acts of disability discrimination by relying on a further wrong committed against the employee, namely that of unfair dismissal”: see para. 30 in the judgment of Rix LJ and para. 50 in the judgment of Wall LJ. Wall LJ also agreed with “the succinct and powerful way” in which the ET had expressed its view on the point, which was quoted by Rix LJ at para. 25 of his judgment:
“… We accept Mrs Beart’s argument put forward at the hearing that the employer should not be allowed to profit from what would have been their own unlawful conduct. In our view it would have been unconscionable if they were allowed to do so. If the employer were, by unfairly dismissing Mrs Beart, to escape or partly escape the consequences of having discriminated against her, it would, in our view, severely damage the protection given to employees by the Disability Discrimination Act 1995, or, for that matter, other provisions against, e.g. race or sex discrimination.”
[68]At para. 30 Rix LJ said:
“… I do not understand how it is said that the unfair dismissal is an ‘intervening’ act when it is the act of the tortfeasor itself.”
[69]However, Mr Cohen relies upon the following passage at para. 31 in the judgment of Rix LJ:
“Of course, if a claimant commits a repudiatory breach of his own contract of employment, thereby entitling a defendant employer to terminate that contract by dismissing him, then it is possible, if necessary, to describe that as a new intervening act. The fact that the defendant reacts as he is entitled to do, by accepting the repudiation as bringing the contract to an end, does not make his reaction the critical new act: it is the repudiatory conduct of the claimant which is significant, unless perchance it is waived. In any event, the repudiatory conduct might have taken place even prior to the tort of discrimination and be discovered only later: but if the contract was already potentially doomed to be lost upon discovery of the repudiatory conduct, then again the claimant has lost the value of that contract, once the employer had acted as he was entitled to do properly to accept the repudiation as bringing the contract to an end.”
[70]As Mr Cohen fairly accepts, all of that was obiter since those were not the facts of that case: see para. 32. In my judgement, the passage upon which Mr Cohen relies does not bear the weight which he has sought to place upon it. The passage I have quoted provides, at its highest, only tentative support for Mr Cohen’s submission: Rix LJ said it was “possible, if necessary” to describe a lawful act of dismissal as a new intervening act.[71]In my view, the ratio of Beart is properly to be understood as being that it would be unconscionable for an employer to rely upon its own unlawful act of unfair dismissal to suggest that, in a disability discrimination claim, the chain of causation has been broken. The converse proposition does not necessarily follow as a matter of law: that a lawful act of dismissal will always be a new intervening act which breaks the chain of causation. It depends on the precise facts, for example what the events were which led to the act of dismissal. Ahsan v The Labour Party[72]In Ahsan the claimant had been a Labour councillor on Birmingham City Council. He ceased to be a councillor in May 1998 as a result of his non-selection by his party. In March 2002 he was formally suspended from holding office, or representing the Party, pending investigation of certain allegations. In consequence he was not available for selection as a candidate in 2002. One of the claims he brought (the fourth claim) complained that his suspension constituted racial discrimination and/or victimisation.[73]Since the claimant had not explicitly resigned, his membership of the Party formally continued.[74]As regards the fourth claim the claimant in due course recognised that this was bound to fail and it was withdrawn: see para. 12 of the EAT judgment.[75]On behalf of the claimant counsel advanced the case that the loss of the entirety of his career as a councillor was attributable to three acts of discrimination about which he complained: see para. 16(1) of the EAT judgment. One of the issues in the case was whether the claimant’s suspension in March 2002 and/or his leaving the Party in 2004 had broken the chain of causation. As to the first of those matters, counsel contended that the respondent was not entitled to rely on the suspension because it was wrongful, both because it was an act of discrimination/victimisation, contrary to the Race Relations Act 1976 and because it constituted a breach of contract under the Party’s rules. In that context counsel for the claimant relied on the decision of this Court in Beart as authority for the proposition that “a tortfeasor may not rely upon his own wrongful act to break the chain of causation”: see para. 16(1) of the EAT judgment.[76]Those submissions made on behalf of the claimant were rejected by the EAT. At para. 30 the EAT allowed the employer’s cross-appeal because the ET had awarded 25% of the claimant’s post-termination losses. The EAT regarded the following point as decisive:
“… The reason why the claimant was not elected as a Labour Councillor in June 2004 was not because any loss of political capital had led to his local Party not electing him but because he had left the Party. He cannot claim compensation for the consequences of damage which might have caused loss in different circumstances but did not do so in the events which actually happened.”
[77]In that context the EAT addressed the submission made by counsel for the claimant by reference to the case of Beart. At para. 32 the EAT rejected that argument in the following way:
“One difficulty about drawing an analogy between Beart and the present case is that the alleged supervening act in the former, namely Mrs Beart’s dismissal, had been explicitly held by the Tribunal to be unfair (and thus in the relevant sense wrongful), whereas here not only has no finding been made that the suspension and/or investigation constituted unlawful discrimination but the Tribunal had no jurisdiction to make such a finding, at least as the basis of an award.”
[78]Later, in the same passage, the EAT said:
“… There was no question that Mrs Beart had suffered a loss of earnings from the prior acts of discrimination: she had been rendered too ill to work. It is … entirely understandable that the Court of Appeal was not prepared to regard that loss as notionally trumped by her subsequent dismissal. But the claimant’s potential claim for the consequences of the loss of political capital, i.e. damage to his chances of being selected by his Party as a candidate, is for a loss which never in fact eventuated.”
[79]So far it seems to me there is nothing in those passages which provides any assistance to the submissions made by Mr Cohen in the present case. However, Mr Cohen relies upon the following passage, at para. 24 in the judgment of Underhill J:
“… It is well-established that a ‘but for’ connection – so-called ‘cause in fact’ – is not necessarily enough to found liability for the consequences of a wrongful act … liability extends only to those consequences which ‘directly and naturally’ flow from the act complained of: see, most authoritatively in this field, Essa v Laing Ltd [2004] ICR 746. (The reasoning of the Court in that case leaves open the possibility that in factual situations different from that before it a test of reasonable foreseeability is also appropriate; but that point was not argued before us.)”
[80]However, in my view, there is nothing in that passage which provides assistance to Mr Cohen in the present appeal. The EAT was saying only that “but for” causation will not necessarily be enough to found liability for the consequences of an unlawful act.[81]In my view, the decision in Ahsan is readily explicable by reference to its own facts. Those facts are not analogous to the facts of the present case. Nowhere in Ahsan is it said that there is a general principle of law that a lawful act of termination will be a new intervening act or that it will break the chain of causation.[82]On behalf of the Claimant Mr Laddie submits not only that there is no authority which supports the wide proposition of law which Mr Cohen seeks to advance but that, to the contrary, there is authority which points in the opposite direction. He relies on the decisions of this Court in Reynolds v CLFIS (UK) Ltd and others [2015] EWCA Civ 439; [2015] ICR 1010 and Royal Mail Ltd v Jhuti [2017] EWCA Civ 1632. I would accept the submissions made by Mr Laddie on behalf of the Claimant in the present case that those two decisions of this Court lend support to the proposition that even a lawful act of dismissal will not necessarily break the chain of causation.[83]The first case arose in the context of age discrimination: Reynolds v CLFIS (UK) Ltd. That was an example of what has become known as “tainted information” cases, as described by Underhill LJ at para. 34:
“We are accordingly concerned not with joint decision-making but with a different situation, namely one where an act which is detrimental to a claimant is done by an employee who is innocent of any discriminatory motivation but who has been influenced by information supplied, or views expressed, by another employee whose motivation is, or is said to have been, discriminatory. I will refer to this as a case of ‘tainted information’ (treating ‘information’ widely so as to cover also the expression of views). I agree with Singh J that tainted information cases may arise in a variety of different ways, but I will for the purpose of discussion take as an example a case of the kind with which we are concerned here – that is, one where a manager has decided to dismiss an employee on the basis of an adverse report about her from another employee who is motivated by her age. I will refer to the employer as E, the claimant as C, the decision-maker as X and the informant as Y.”
[84]At para. 35 Underhill LJ explained that potential injustice can be avoided in that sort of situation by adopting the “separate acts approach” so that there is no need for a “composite act approach”:
“I agree with Singh J that it would plainly be unjust if in such a situation C had no remedy against E; and that was in fact common ground before us. But the parties differed as to the legal basis on which a remedy should be available. Mr Pitt-Payne’s submission was that Y’s discriminatory motivation could be treated as a ground, or part of a ground, for C’s dismissal, albeit that the actual decision-maker was X; and it seems, though his reasoning was not perhaps quite explicit, that that was also the approach of Singh J. I will refer to this as ‘the composite approach’, because it involves bringing together X’s act with Y’s motivation. Mr Tatton-Brown submitted that that was illegitimate and that the right approach was to treat Y’s report as a discrete discriminatory act, for which E was liable (provided it was done in the course of Y’s employment, and subject to the ‘reasonable steps’ defence) by virtue of regulation 25. with C being able to recover for the losses caused by her dismissal as a consequence of that act rather than because the dismissal itself was unlawful. I will refer to this as ‘the separate acts approach’. Mr Pitt-Payne accepted that that was a possible analysis, but he submitted that it was unnecessary and over-complicated and that if it were the only route that would have various unsatisfactory consequences to which I will return below.”
[85]At para. 39 Underhill LJ summarised the position as follows:
“By contrast, the separate acts approach conforms entirely to the scheme of the legislation. To spell it out: … (5) The losses caused to C by her dismissal could be claimed for as part of the compensation for Y’s discriminatory act, since they would have been caused or contributed to by that act and would not (at least normally) be too remote.” (5) The losses caused to C by her dismissal could be claimed for as part of the compensation for Y’s discriminatory act, since they would have been caused or contributed to by that act and would not (at least normally) be too remote.”
[86]While it is true that Reynolds concerned “tainted information” cases, I can see no reason in principle why the same reasoning should not apply to other cases of alleged discrimination. At the hearing before this Court, Mr Cohen did not shrink from submitting that the principle of law for which he contends would apply in discrimination law cases generally and that tainted information cases are in a category of their own. For example, if a woman has been subjected to appalling sexual harassment in the workplace for many months and eventually responds in a way which constitutes misconduct which justifies dismissal, Mr Cohen submits that, as a matter of law, she could never recover compensation for post-termination losses because the act of lawful dismissal operates as a new intervening cause. I do not accept that such a broad principle of law exists. In my view, as Simler J said in the present case, it would all depend on the particular facts and that requires evidence.[87]Nor can it be said that Reynolds is a case only about the discrimination legislation. The reasoning in Reynolds was applied in the context of “whistleblowing” cases under section 47B of the 1996 Act (the very context with which this case is concerned) in the recent decision of this Court in Jhuti: see para. 33 in the judgment of Underhill LJ, where he referred to “compensation for dismissal consequent on detriment.”[88]At para. 78 Underhill LJ said:
“There is thus, on the argument advanced before us, no obstacle in principle to the claimant recovering compensation for dismissal consequent on detriment. Whether she can do so in practice, or to what extent, is of course a matter for the ET at the remedy hearing. …”
[89]At para. 79 Underhill LJ said:
“… I held in para. 39(5) of my judgment in CLFIS v Reynolds … that in principle losses occasioned by a claimant’s dismissal may be recoverable as compensation for an unlawful detriment which caused the dismissal. That was said in the context of age discrimination, but this is an area where I can see no reason in principle (i.e. subject to what follows) for adopting a different approach in a case of whistleblower discrimination. The real issue is whether a claim on that basis is inconsistent with the terms of section 47B(2). What the subsection does is preclude a claim under the operative parts of the section where the detriment which is the subject of the complaint to the Tribunal – what in other contexts would be called the cause of action – ‘amounts to a dismissal’; and it is clearly arguable that in this kind of case the relevant detriment is the prior treatment complained of, the dismissal being only a consequence of that detriment. But it may be that that distinction is not as straightforward as it seems …”
[90]In the result this Court decided that it should be declared that the claimant was not precluded by the way in which her claim had been put in the ET from advancing a claim for losses occasioned by her dismissal as compensation for the unlawful detriments found under section 47B: see para. 80.[91]Although Mr Cohen sought to persuade us that the reasoning in Jhuti is based on concessions which were made by counsel in that case, it seems to me that the present appeal is similar in the sense that there are issues of fact which need to be resolved on evidence before the ET. In my judgement, there is no rule of law which precludes the present Claimant from seeking to claim the post-termination losses which he does on the ground that they are attributable to the allegedly unlawful pre-termination detriments about which he complains. (4) Was the decision of the EAT inconsistent with the decision of this Court in Western Excavating v Sharp?[92]As I have mentioned, it was suggested in the Respondents’ original skeleton argument that the decision of the EAT in the present case was inconsistent with the well-known decision of this Court in Western Excavating v Sharp. It is fair to say that this aspect of the argument did not loom large at the hearing before us. Nevertheless, since it is one of the issues which has been raised before this Court, I will deal with it briefly.[93]In my judgement there is no merit in this ground at all. The decision in Western Excavating v Sharp concerned the concept of constructive dismissal. In the law of unfair dismissal Parliament has provided that the concept of dismissal includes constructive dismissal: the material provisions are now contained in section 95 of the 1996 Act although the unfair dismissal legislation goes back to the Industrial Relations Act 1971 and the relevant legislation at the time of Western Excavating v Sharp was contained in the Trade Union and Labour Relations Act 1974.[94]As is well established an employee may be entitled to claim that he or she was dismissed even though he or she resigned from employment on the ground that the conduct of the employer amounted to a repudiatory breach of the contract. In Western Excavating v Sharp, the Industrial Tribunal had applied a test of unreasonableness to the employer’s conduct. It was that error which this Court needed to correct in its decision. At p. 227 Lord Denning MR said:
“The new test of ‘unreasonable conduct’ of the employer is too indefinite by far. It has led to acute difference of opinion between the members of Tribunals. Often there are majority opinions. It has led to findings of ‘constructive dismissal’ on the most whimsical grounds. The Employment Appeal Tribunal tells us so. It is better to have the contract test of the common law. It is more certain: as it can well be understood by intelligent laymen under the direction of a legal chairman.”
[95]On behalf of the Appellant Mr Cohen submits that in the present case the EAT fell into error because Simler J appeared to suggest that the appropriate test was indeed one of ‘unreasonable conduct’ of the employer. In my view that is a wrong reading of her reasoning. She was concerned with issues of causation, not the meaning of constructive dismissal. In particular she was concerned with the provisions of section 49 of the 1996 Act. The issue in Western Excavating v Sharp was an entirely different one. In the context of the issues in the present case I have no doubt that the EAT did not fall into error as suggested.

Conclusion

[96]For the reasons I have given I would dismiss this appeal.

Lady Justice Hallett :

[97]I agree.

Lord Justice Longmore :

[98]I also agree.

Cited in 14 later judgments

and 5 more of the most senior