Published online by Cambridge University Press: 02 July 2013
In Edwards v Chesterfield Royal Hospital N.H.S. Foundation Trust the majority of a seven-justice Supreme Court held that a common law claim for breach of express contractual disciplinary procedures was pre-empted by the statutory right to claim for unfair dismissal. Further, they held that one express term (the notice clause) should be prioritised over another (the contractual disciplinary procedure). In this article we argue that the application of the idea of statutory “trumping” of the common law misunderstands the complex evolution of the common law in this field and its interplay with statute. We also argue that the traditional pre-eminence given to notice clauses over all other express terms needs to be reconsidered.
1 Johnson v Unisys Ltd.  UKHL 13  1 A.C. 518.
2 Dunnachie v Kingston Upon Hull City Council  I.C.R. 1052.
3 Eastwood v Magnox  UKHL 35  1 A.C. 503 joined with the appeal in McCabe v Cornwall County Council.
4  UKSC 58;  2 W.L.R. 55 joined with the appeal in Botham v Ministry of Defence.
5 J. Bell and G. Engle Cross Statutory Interpretation., 2nd ed. (London 1987), 41. The relationship between common law and statute in the law of obligations has recently been reviewed by Professor Burrows and he argues that common law and statute are “more fully integrated than has traditionally been thought”: Burrows, A. “The Relationship between Common law and Statute in the Law of Obligations” (2012) 128 L.Q.R. 232, 233Google Scholar.
7 Burrows, note 5 above, p. 234 notes that “the vast majority of statutes in the law of obligations can only work if some areas of the common law survive”. See also Anderman, S., “The Interpretation of Protective Employment Statutes and Contracts of Employment” (2000) 29 I.L.J. 223, especially pp. 237–8Google Scholar; and Elias, P., “The Structure of the Contract of Employment” (1982) 35 I.L.J. 95Google Scholar.
8 Burrows, note 5 above, pp. 236–237 gives the example of s (1)(1) of the Occupiers Liability Acts 1957 and 1984.
9 See, generally, Cross Statutory Interpretation, note 5 above, pp. 22–30. Burrows, note 5 above, p. 247 says that “It is a myth to think that by passing a statute Parliament has positively decided that what would otherwise be a legitimate common law development should not be pursued. Parliament is most realistically regarded as having no view, let alone a negative view, on a common law development.”
10 See Lord Hoffmann's, exposition of the principles of contractual construction in Investors Compensation Scheme v West Bromwich Building Society  1 W.L.R. 896Google Scholar.
11 In other words adopting a purposive approach to statutory interpretation.
12  1 A.C. 518 at .
13 This corresponds with Burrow's view, note 5 above, p. 258 that the existence of a statute is rarely a good reason for denying a natural development of the common law, absent factors such as impracticality or inconsistency.
15 Re Wait  1 Ch. 606, 635–636 per Atkin L.J.
16 Sir Bob Hepple in his third Hamlyn Lecture “The Common Law and Statutory Rights” in Rights at Work (London 2005) identifies the absence of an employment code as one of the key structural problems which prevent the natural and sensible development of our employment law (p. 43) and notes that in the absence of such a code it is important to appreciate that the common law of employment and statutory rights are imbricated, like overhanging roof-tiles, and keep each other in place (p. 53).
18 Beatson refers to this as a situation where “no statute governs the situation although there is legislation in a relevant area”: J Beatson “Has the common law a future?”  C.L.J. 291. He adds that “Although the courts have sometimes regarded legislative intervention as defining the relevant principles and policies so as to preclude judicial activism not only in the area explicitly covered but also in related areas, they do not always do this.”
19 Halsburys Laws of England 5th ed., vol. 78, §106.
20 R v Goldstein R v Rimmington  UKHL 63,  1 A.C. 459.
21 R v Goldstein  UKHL 63,  1 A.C.459 per Lord Bingham at .
23  EWHC 340 (Admin).
24 At .
27  Q.B. 781.
28 Beatson, J., “The role of statute in the development of common law doctrine” (2001) 117 L.Q.R. 247, 257Google Scholar.
29 Mahmud and Malik v Bank of Credit and Commerce International SA  A.C. 20.
30 As Lord Hoffmann put it in Johnson (at ), the statutory rules were based on public policy and attempts to balance fairness to employees against the general economic interests of the community.
31 Subject to a deduction on the basis of a finding that he had contributed by 25% to his dismissal. Such reductions are expressly permitted under the unfair dismissal legislation.
32 As referred to further below, Lord Hoffmann also discussed whether the result would have been different if the disciplinary procedures had formed express terms of the contract.
33 Per Lord Nicholls at .
34 The statutory system for dealing with unfair dismissals was set up by Parliament to deal with the recognised deficiencies of the law as it stood at the time of Malloch (per Lord Hoffmann at ).
35 The development of the statutory remedy following the Donovan Report in 1968 is described by Lord Steyn at –.
36 On the background to the adoption of the Act, see Davies, P. and Freedland, M., Labour Legislation and Public Policy (Oxford 1993), 194–211Google Scholar.
37 Per Lord Nicholls in Johnson at , emphasis added.
38 As Lord Hoffmann made clear at , this is what the Johnson case was about: ‘the first question is whether the implied term of trust and confidence … or any other implied terms, applies to a dismissal’.
40 Per Lord Millett at .
41  UKHL 35;  1 A.C. 503.
42 See also Lord Hoffmann in Johnson at .
43 Gogay v Hertfordshire County Council  I.R.L.R. 703
44 Collins, H., “Claim for unfair dismissal” (2001) 30 I.L.J. 305Google Scholar, 307: “In truth, the upper limit on compensation for unfair dismissal, like the other restrictions on the statutory right, constitutes a pragmatic restriction designed to protect the competitiveness of business.”
46 See further Hepple, B. and Morris, G., “The Employment Act 2002 and the Crisis of Individual Employment Rights” (2002) 31 I.L.J. 245Google Scholar, 253.
47 Although government policy at present is going in the opposite direction: BIS, Ending the Employment Relationship, 2012 where a cap on individual awards of 12 months' pay (where this is less than the overall cap) is to be introduced. See also the Enterprise and Regulatory Reform Act 2013 s.15. Cf Lord Steyn in Eastwood at : if the statutory cap on unfair dismissal awards is “allowed to constrain the development of the common law it may come at too high a price in the failure of corrective justice”.
50 Barmes, L., “Common Law Implied Terms and Behavioural Standards at Work” (2007) 36 I.L.J. 35, 36–37Google Scholar citing Scally v Southern Health and Social Services Board  1 A.C. 294, 307 following the origins of the formulation in Liverpool City Council v Irwin  A.C. 239. See also Sir Bob Hepple, note 16 above, p. 62.
52 See also Brodie, D. “Mutual Trust and Confidence: Catalysts, Constraints and Commonality”  I.L.J. 329, 331Google Scholar describing implied terms as allowing for “an expression of the judicial view as to the appropriate obligations in a relationship” and that the effect of Johnson is that judicial intervention may be curtailed where Parliament has spoken.
53 This aspect of the decision, in particular, the assimilation of provisions about disciplinary procedures into the unfair dismissal mechanism, is discussed in detail in Costello, K. “Edwards v Chesterfield Royal Hospital – Parliamentary Intention and Damages Caused by Maladministration of a Contractual Dismissal Procedure” (2013) 76 M.L.R. 134, 135–137CrossRefGoogle Scholar.
54  EWCA Civ 571,  QB 339. At  and .
55 At .
56 At .
57 At .
58 At .
59 At .
60  EWCA 571,  and .
61 See Norton Tool Co v Tewson  1 W.L.R. 45 noting in the context of assessing damages for unfair dismissal that “in our judgment the common law rules and authorities on wrongful dismissal are irrelevant. That cause of action is quite unaffected by the  Act which has created an entirely new cause of action”.
62 At .
63 Lord Kerr said at  ‘there is no suggestion in the report that its authors contemplated a complete charter for all claims arising from dismissal from employment’. Costello, note 53 above, p. 139, suggests that the argument turns on whether damages in respect of manner of dismissal existed before the 1971 Act. If not, that explained why Parliament did not expressly supress such claims.
64 At .
65 See Lord Hoffmann in Johnson, at  who expressly states that “The contractual claim is therefore squarely based on a breach of the implied obligation of mutual trust and confidence between employer and employee.” However, despite the clear context of a case about the implied term, some of Lord Hoffmann's remarks, when taken out of context, might suggest that the case was authority for a broader proposition. For example, he said “For the judiciary to construct a general common law remedy for unfair circumstances attending dismissal would be to go contrary to the evident intention of Parliament that there should be such a remedy but that it should be limited in application and extent”: .
67 See e.g. Johnstone v Bloomsbury  2 All E.R. 293, Morrow v Safeway  I.R.L.R. 2. Even Lord Phillips, in the majority, recognised that common law relating to contracts of employment continued to develop in a manner favourable to employees, following the 1971 Act at .
68 This possibility was expressly recognised by the Donovan report (Report of the Royal Commission on Trade Unions and Employers' Associations (1965–8), Cmnd. 3623, §522 and referred to by Lord Steyn in Johnson at  and Lord Mance in Edwards at .
69 This principle was referred to by Lord Dyson in Edwards in the context of the decision in Gunton at .
70 “The basis of the rule is not a factual assumption as to what the defendant would have done had he not broken the contract, but rather a point of principle: the claimant is entitled to be compensated only in respect of the minimum rights he had under it”: A. Tettenborn,, The Law of Damages, 2nd ed, (London 2010), §19.10. For example, where a contract is for delivery of 200 tons, 5% more or less, of goods, damages for non-delivery are assessed on the basis of a failure to deliver 190 tons rather than 200 or 210 as that is all that the defendant was contractually obliged to deliver (Thornett v Fehr  K.B. 219).
71  EWCA Civ 195.
72 At .
73 See also S. Deakin and G. Morris Labour Law, note 45 above, p. 431: “contracts containing neither an express nor an implied notice term are, by their nature, rare. In a contract of fixed-term duration, the absence of an express notice clause might not be surprising: both parties might expect the contract to be worked out for the period agreed.”
74 In Edwards Lord Mance seemed to accept that a contract containing an express term which was treated as involving an obligation not to dismiss save for good cause shown raised different issues () and that this was a reason for distinguishing King v University Court of the University of St Andrews  I.R.L.R. 252. Baroness Hale thought that if under a contract of employment the employer is only entitled to dismiss the employee with good cause, the employer dismisses without good cause, the employee is entitled to be compensated for the consequences of the loss of the job.
75 The majority of the House of Lords in McClelland v Northern Ireland General Health Services Board  1 W.L.R. 594 held that a contract of employment of a senior clerk which was expressed to be “permanent” and “pensionable” could not be terminated on notice because the terms providing for dismissal in various circumstances were intended to be comprehensive and exhaustive.
76 See Lord Steyn in Mahmud, at p. 51.
77 At .
78 Lord Hoffmann in Johnson (at ) said he did not think the terms in relation to disciplinary proceedings could have been intended to qualify the employer's common law power to dismiss without cause on giving notice.
79 See also hints to that effect by the majority in R v Lord President of the Privy Council, ex parte Page  A.C. 114, 137 per Lord Browne-Wilkinson, although the case as decided on other grounds. The Court of Appeal had taken a similar view which was helpfully summarised by Keene L.J. in Kaur v MG Rover  I.R.L.R. 40, §26: “It is right that in ex parte Page the court was concerned with two express terms, one in Mr Page's letter of appointment which provided for either party to terminate on three months' notice in writing, and one in the university's statutes empowering the university to dismiss him for good cause. The Court of Appeal held that he could be dismissed on either basis and that good cause was not required if three month's notice was given. So the right to terminate on notice was not cut down by the ‘good cause’ term. But as the court made clear, that was a question of construction of the particular contractual documents and terms involved in that case. There was no general principle of law established by that decision to the effect that notice clauses in such contracts are to prevail over other express terms concerned with termination. It will in all cases be a matter of construing the individual contract of employment.” See also Alexander v Standard Telephones and Cables (No.2)  I.R.L.R. 286.
80 Gunton v Richmond upon Thames London Borough Council  I.C.R. 755.
81 See also R v Lord President of the Privy Council, ex parte Page  A.C. 114, 137 per Lord Slynn in the minority since he dissented on the point about the jurisdiction of the visitor.
82 Edwards, Moore-Bick L.J., at .
83 At .
84 At .
85 Lady Hale at .
86 http://www.justice.gov.uk/downloads/statistics/mojstats/employment-trib-stats-april-march-2010-11.pdf/, table 5 with only 51 cases (2%) receiving more than £50,000.
87 Lord Dyson at .
88 Lady Hale at , Lord Kerr at .
89 Hill v Parsons  1 Ch. 305; Irani v. Southampton and S.W. Hants. A.H.A.  I.R.L.R. 203; Powell v London Borough of Brent  I.R.L.R. 466; Lakshmi v Mid Cheshire Hospitals N.H.S. Trust  I.R.L.R. 956.
90 Employers should not simply be able to avoid the disciplinary altogether by giving no reason: this would be “grotesque” (Gunton v Richmond-upon-Thames London Borough Council  Ch. 448, 457 per Shaw L.J. (dissenting but concurring in the result)) or giving a non-disciplinary reason.
91  I.R.L.R. 40, at .
92 S.30 EA 2002.
93 At .
94  I.C.R. 809, 817 C-D “The only other issue to which it is necessary for me to refer is the question of remoteness. It is not necessary to decide this appeal on this ground. However, I would regard the prospects of the plaintiff establishing that the loss which he claims is not too remote, both in contract and tort, as being unreal. If there had not been the history of psychological problems the damages (in excess of £11,000) claimed would clearly be too remote. The time which elapsed between 1985/1987 and 1994 is considerable and sufficient to prevent the plaintiff establishing the necessary degree of foreseeability of his alleged loss.”
95 At .
96 At .
97 At .
99 Foreseeability forms the basis of the traditional two heads of remoteness Hadley v Baxendale (1854) 9 Ex. 341, allowing losses which occur as a natural result of the breach, or which were within the contemplation of the parties as likely to result.
100  A.C. 191.
101 At .
102 See for example, criticising these recent developments Stiggelbout, M., “Contractual remoteness, ‘scope of duty’ and intention”  L.M.C.L.Q. 95Google Scholar.
103  A.C. 488.
104 On this aspect of the decision see Brodie, D. “The Beginning of the End for Addis v The Gramophone Company” (2009) 38 I.L.J. 228Google Scholar.
105 Per Lord Loreburn L.C.,  A.C. at p. 491 as summarised by Lord Nicholls in Mahmud,  A.C at p.26 (and by Lord Steyn in Johnson at  but he also notes the controversy surrounding the ratio of the case – and ).
106 This issue is discussed in detail by Collins, H. “Compensation for Dismissal: In Search of Principle” (2012) 41 I.L.J. 208, 215–219Google Scholar. He argues that an “exclusion of claims for stigma damages [concerning damages to employability] resulting from breach of an express term, whether substantive or procedural would be illogical and contrary to the ordinary principles of contract law” (p. 217).
107 Per Lord Steyn,  A.C. at p. 51.
108 Lord Nicholls  A.C. at p. 37. Lord Steyn, at p. 53, also referred to the fact that the Law Commission has pointed out that loss of reputation is inherently difficult to prove: CP No 132, Aggravated, Exemplary and Restitutionary Damages, p. 22 para 2.15.