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Lakshmi v. Mid Cheshire Hospitals NHS Trust


Queen’s Bench Division

An employer was in breach of contract for failing to adjourn a disciplinary hearing, contrary to its disciplinary policy, and thereby in breach of contract for dismissing the employee at that hearing. Consequently, the employee was entitled to damages to reflect the salary lost during the four-week period when there should have been an adjournment.
The claimant consultant physician (L) sought damages and a declaration that she remained employed by the defendant NHS trust (X). X found evidence that on at least 46 occasions L had, whilst in its employ, completed Form C of the Cremation Act Certificate without complying with the statutory requirement of seeing the deceased's body. It was also alleged that on occasions she had completed the form without discussing the death with the treating doctor. An investigation was undertaken by X, but L failed to provide an explanation of her actions or attend meetings. The police learnt of L's actions, and so X, in accordance with clause 3.7 of its own disciplinary policy, stayed its investigation. L was permitted to continue working, but was stopped from signing cremation forms. However, she was later suspended in relation to other matters. After X's attempts to learn whether L would be prosecuted had failed, X decided to resume its investigation. L declined to answer X's questions, although she had admitted to the police the essential allegations made. L and the police asked X to postpone the planned disciplinary hearing, but X refused. At the hearing, L said nothing and was summarily dismissed. The criminal proceedings were then not pursued. L submitted that (1) parts of the disciplinary policy, and particularly clause 3.7, had been incorporated into her terms and conditions of employment and represented a change to the terms and conditions of service. L argued that, as the relevant clauses were expressed in mandatory terms, the failure to comply with them amounted to a repudiatory breach of contract, which she had not accepted, and thus the court was entitled to declare that the dismissal was of no legal effect and to order specific performance; (2) alternatively, not to adhere to the guidance unless there was good reason not to do so amounted to a breach of an implied term of good faith.

HELD: (1) The disciplinary policy was said to constitute a change to the terms and conditions of service. That was not inconsistent with the policy being, and remaining, policy guidance for X rather than a set of rules to be read into the contract of employment, Alexander v. Standard Telephones & Cables Ltd (No2) (1991) IRLR 286 Ch D considered. If parts of the policy were expressly incorporated into the contract of employment they had to be interpreted strictly and in accordance with contractual law. On that basis it was arguable that clause 3.7 allowed X no discretion: whenever X suspected a criminal offence it would be reported to the police and X's own investigation would only proceed in respect to other, unrelated aspects. The fact that it needed to be regarded as discretionary, whilst at the same time being couched in mandatory terms, led to the conclusion that it was not apt to be viewed as an express contractual provision. The document was guidance, and therefore its provisions should not be regarded as contractual. (2) There was a term of the employment contract that X would comply with the policy unless it could establish good reason not to do so. It was a free-standing term of the contract, necessary for it to be effective. In the alternative, X only complied with its obligation to act in good faith if it complied with the policy, absent a good reason not to do so. However, the implied term to act in good faith applied irrespective of the existence of the policy. (3) L's actions were serious breaches of her obligation of trust and confidence, amounting to repudiatory breaches of contract that X could choose to accept. However, there was no good reason why the disciplinary hearing could not have been delayed for a month. That failure was sufficient to render X in breach of contract. Moreover, by continuing with the hearing, X did not act in a way that was compatible with the obligation of trust and confidence that it owed to L. Consequent upon the breach in failing to adjourn, X was also in breach of contract in summarily dismissing L. (4) The breach of duty caused the disciplinary hearing to go ahead when it should have been delayed for four weeks and the dismissal would also have been delayed. L was therefore entitled to damages to reflect the loss of salary consequent upon the failure to adjourn. Any other loss flowed from the dismissal and was irrecoverable, Johnson v. Unisys Ltd (2001) UKHL 13, (2003) 1 AC 518 applied. (5) The only basis upon which a court could or should grant a declaration or injunction that had the effect of preserving the relationship of employer and employee was where the court could find that a basis of mutual trust and confidence had survived between employer and employee. That relationship was not intact in the instant case.

Judgment for claimant in part.

For the claimant: John Hendy QC, Deshpal Panesar.
For the defendant: Andrew Hillier QC, Giles Powell.

[2008] EWHC 878 (QB), Lawtel 11/6/08

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