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Chambers & Partners
17/02/2022

Quantification of consequential loss in cases of constructive dismissal

News

In her recent judgment in Shittu v South London & Maudsley NHS Foundation Trust [2022] EAT 18, Mrs Justice Stacey assessed the proper approach of a Tribunal to the quantification of the remedy for constructive unfair dismissal and disability discrimination dismissal, as it relates to quantification of consequential loss/loss of future earnings.

The Facts

The Claimant, in remission from cancer, was a disabled person within the meaning of section 6 Equality Act 2010.  The Respondent had made a deduction from the Claimant’s pay on the basis that he had an ‘unauthorised absence’ from work. That absence was caused by the Claimant’s attendance at a hospital appointment for a post cancer check-up and colonoscopy. The Claimant went off sick, and had lodged grievances in relation to the deduction, alongside various other matters including bullying and harassment. He subsequently resigned and brought a claim in the Employment Tribunal.

The Tribunal Claim

The Claimant’s grounds of complaint were extensive. He alleged constructive unfair dismissal (citing “47 or 54” breaches of contract); automatically unfair dismissal by reason of protected disclosure, or, alternatively a health and safety reason for dismissal; detriment and unfair dismissal on the grounds of discrimination, victimisation and harassment on the basis of his disability; detriment on the grounds of public interest disclosure or, alternatively, health and safety disclosure; and complaints of unauthorised deductions from wages, and wrongful dismissal.

The Respondent defended the claim of unfair dismissal on the basis that there had been no dismissal, submitted that the Claimant had not been subjected to any detriments, and that his contract had not been breached. Even had there been breaches, those breaches were insufficient to entitle the Claimant to consider himself constructively dismissed.

The Claimant was unsuccessful in most of his alleged breaches/detriments. However, the ET held that the Respondent had failed to investigate and deal with his complaint about being subjected to an unlawful deduction, which was sufficient to constitute a breach of the implied term of trust and confidence. The Claimant’s resignation had been in part (albeit, in the ET’s view, in very small part [42]) in response to that breach. As such he had been unfairly constructively dismissed contrary to section 98 of the Employment Rights Act 1996. That treatment was also found to amount to discrimination arising from disability and a failure to make a reasonable adjustment under sections 15 and 21 of the EqA 2010.

The remedy for that breach was an award of basic pay in respect of the constructive unfair dismissal, loss of statutory rights, injury to feelings, and interest. There was no compensatory award made, nor any loss of earnings damages.

In reaching that decision, the Tribunal had referred to the loss of chance assessment in Polkey v A E Dayton Services Limited [1987] IRLR 503, HL, which allows a Tribunal to reduce the amount in respect of loss of earnings awarded if it considered that the Claimant may have been dismissed fairly at a later date had a proper procedure been followed, but had not clearly set out on what basis it had reduced the award to 100%.

The Tribunal did, however, say that it considered the unlawful deduction to be a small part of the Claimant’s dissatisfaction with his employment, and went on to say that:

“121. For the reasons given above relating to the discrimination claims, when considering the Polkey principle the Tribunal inevitably reaches the unanimous conclusion that the Claimant would have resigned in any event absent the deduction from wages and consequent complaint issue arising in April 2015 and accordingly no loss of earnings arise.”

The Appeal

The Claimant appealed against the refusal of the tribunal in respect of compensation/loss of earnings, arguing that the ET had moved irrationally from a finding on the balance of probabilities that the Claimant would have resigned in any event, to a 100% Polkey reduction in respect of those damages.

The Respondent argued, first, that the Tribunal had concluded that there was a 100% reduction in respect of loss of chance, which was appropriate in the circumstances. In the alternative, the Tribunal had been entitled to approach the question of whether the Claimant would have resigned in any event on the balance of probabilities, partly on the basis of the judgment in Perry v Raleys Solicitors [2019] UKSC 5.

In Perry, a solicitors negligence case, Lord Briggs had held that in the assessment of consequential loss there is a “clear dividing line” between the assessment of what the Claimant is likely to have done (which is to be undertaken on the balance of probabilities), and those actions which third parties are likely to have carried out (to be assessed on the basis of loss of chance). Because the resignation was within the Claimant’s control, it was permissible to reach the decision that he would have done so on the balance of probabilities.

The Decision of the EAT

The EAT dismissed the Claimant’s appeal. It agreed with the Respondent that the Tribunal had undertaken the predictive exercise required in assessing consequential loss in respect of constructive unfair dismissal, and found that the Claimant would have resigned anyway when he had done so, with or without the deduction of “a day’s pay a year earlier”. That finding, the EAT held, had been made on the basis that there was a 100% chance the Claimant would have resigned on 8 August 2016, as the Respondent had argued.

Although not necessary to reach its decision, the EAT turned to the submissions in respect of Perry.

The EAT endorsed a common-sense approach to the assessment of quantum, and considered that it would be ‘wrong to introduce a complex structure of subsidiary rules’ [102].

The EAT observed that Lord Briggs appeared to have been careful to fashion its judgment in Perry to the context of professional negligence claims [98]. The division in Perry, between what a Claimant must prove of his or her own actions on the balance of probabilities, and the analysis of those matters which depend on the actions of third parties in a counterfactual/future world, is applicable in professional negligence cases where there is more often a ‘third party’ involved, and there is a clearer distinction between the acts the Claimant/client would undertake and those the third party would undertake. That is not true of employment relationships, where either the employer or the employee will usually be responsible for bringing an end to the relationship, and neither of those parties can be considered a ‘third party’ to it. Further, the assessment of counterfactuals or future losses will depend on analysis of how the employer and the employee interact, alongside any other actions of third parties.

In essence, Perry “does not overturn the … case law on the assessment of counterfactual and future losses in employment claims before the tribunal that is to be approached on the evaluation of the loss of a chance.” [102] Instead, as in cases of actual or discriminatory cases of unfair dismissal, the Claimant’s future losses or counterfactual losses in cases of constructive unfair dismissal still fall to be assessed on the basis of loss of chance.

Louise Chudleigh represented the Respondent South London & Maudsley NHS Foundation Trust, instructed by Emily Stokes at Capsticks Solicitors

This case summary was written by Sophie David.

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