Appeal No. UKEAT/0623/03/MAA

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 27 November 2003
Judgment delivered on 18 February 2004

Before
THE HONOURABLE MR JUSTICE RIMER
(SITTING ALONE)

MISS M D WEIR	APPELLANT

CONSULT MARINE LTD	RESPONDENT

Transcript of Proceedings

JUDGMENT

Revised

	APPEARANCES

For the Appellant	MISS M D WEIR
(the Appellant in Person)	
For the Respondent	MR CLIVE ASTON
(Director)	

THE HONOURABLE MR JUSTICE RIMER

1.	This is an appeal by Miss M D Weir against a decision of an employment tribunal sitting at Stratford on 10 January 2003.  The decision was that of a chairman, Mr J.N. Leonard, sitting alone.  He sent his extended reasons to the parties on 23 January 2003.  The decision was on a remedy hearing following the tribunal’s decision on 28 June 2002 that Miss Weir had been wrongfully dismissed from her employment with the respondent, Consult Marine Limited (“CML”).  The tribunal awarded Miss Weir damages of £8,419.68 against CML, but also ordered her to pay £500 costs to CML.  Miss Weir asserts on this appeal that the tribunal was in error (a) in failing to award her further damages of at least £1,885.18, and (b) in making the costs order.  Miss Weir appeared in person on the appeal.  CML was represented by Mr Clive Aston, a director.  Miss Weir is a solicitor and Mr Aston is a non-practising barrister.

2.	The background facts can be expressed briefly.  On 7 January 2002, Miss Weir entered into a fixed-term contract of employment with CML.  It was due to determine by effluxion of time on 6 July 2002, although was capable of being renewed for a further period.  Miss Weir’s salary was payable monthly in arrear at a rate of £33,000 a year.  The contract came to an early end. CML summarily determined it on 25 January 2002, although it had no contractual right to do so and nor was there any provision in the contract enabling CML to determine it on notice before 6 July 2002.

3.	The result was that, on 24 April 2002, Miss Weir presented an originating application to the tribunal claiming damages for breach of contract.  The tribunal’s jurisdiction to entertain her claim was under regulation 3 of the Employment Tribunals Extension of Jurisdiction (England and Wales) Order 1994.  Miss Weir accompanied her application with a full explanation of her case.  She said that, since qualification as a solicitor, she had, so far as possible, specialised in marine work, and that CML advised on maritime and commercial matters.  She acknowledged that CML had paid her net salary for the days she had actually worked for it (7 to 25 January 2002) and had also made what she called an ex gratia payment of one month’s gross salary.  She said she had been unable to find alternative employment and was suffering a continuing loss.

4.	Miss Weir’s claim for damages was advanced under several heads.  The only heads with which this appeal is concerned are what she described as her “Earnings-based losses.”  Her basic claim was for her unpaid salary, net of tax and employee’s National Insurance Contributions.  After giving credit for the payments made to her, that claim totalled £8,263.13 and was ultimately undisputed.  In addition, and because no Class 1 NI contributions were paid for her once her employment terminated, she advanced a claim to be reimbursed for the Class 3 voluntary NI contributions she would be entitled to pay - and said she would pay - in order to restore the loss of rights to her basic state pension she would otherwise suffer as a consequence. Her claim under this head was for £156.55, and CML ultimately also conceded that claim too.

5.	Miss Weir also advanced three further claims under the heading of “Earnings-based losses”.  These have always been in dispute and are as follows: (i) the loss of the state’s contribution to her contracted-out personal pension scheme with Standard Life; (ii) her lost entitlement to a contribution-based jobseeker’s allowance; and (iii) her loss of use of the net earnings from the moment they would, but for CML’s breach of contract, have been paid to her.
The Remedy Hearing before the Employment Tribunal

6.	Before the remedy hearing, CML had conceded that Miss Weir was entitled by way of damages to (i) her unpaid salary net of tax and NI contributions, totalling £8,263.13, and (ii) the £156.55 by way of compensation for the cost of the Class 3 voluntary contributions.  Those sums totalled £8,419.68, which CML had offered to pay.  Miss Weir declined to accept CML’s offer, for two reasons.  First, it was not accompanied by an apology and she wanted one.  Secondly, she claimed to be entitled to a greater sum of damages than had been offered.  So the remedy hearing went ahead.

7.	The tribunal directed itself by reference to certain authorities (in particular, Johnson v. Unisys Ltd [2001] IRLR 279 and Focsa Services (UK) Ltd v. Birkett [1996] IRLR 325) that the measure of damages payable to an employee for the premature termination of his contract of employment is no more than the sum equal to the pay he should have had during the contractual notice period.  Applying that to Mrs Weir’s case, that meant the net salary she should have had during the remainder of the six-month term, since the contract could not be terminated by notice earlier than the date on which it was due to expire by effluxion of time.  The tribunal awarded her the admitted sum of £8,263.13 to compensate her for loss on this basis.  It also awarded her the further sum of £156.55, saying that “Since that latter sum is conceded, no reason need be given.”

8.	The tribunal rejected Miss Weir’s claim for further damages under the three heads I have outlined.  The Chairman said:

“8	Apart from her claim to general damages, Miss Weir also seeks special damages representing lost contributions to her contracted out pension scheme; a lost entitlement to contribution based job-seeker’s allowance and loss of use of income, based on the rate of return available in her building society account.  In a jurisdiction such as this, there is a commendable simplicity in the adoption of the conventional approach to an award of damages for wrongful dismissal.  The Tribunal is not persuaded that it should make any award in respect of any of those additional items.  A type or kind of loss is not too remote a consequence of a breach of contract if, at the time of contracting (and on the assumption that the parties actually foresaw the breach in question), it was within their reasonable contemplation as a not unlikely result of that breach (see Chitty on Contracts 28th Edition 27-044).  That test is not satisfied.
9	In the course of argument, the Chairman speculated that Miss Weir might have pleaded a claim to interest.  The jurisdiction of this Tribunal in contract claims is limited to those which a court in England and Wales would have had jurisdiction to hear and determine.  Under CPR 16.4, a claim to a civil court must state if interest is claimed and on what basis.  No such claim was made and the Tribunal considers that it would be wrong to allow that claim at such a late stage.  Mr Aston could have considered such a claim on its merits and, if accepting that it was soundly based, the issue could have been compromised or argued; probably the former, if both parties were to approach the issue reasonably.
10	Mr Aston, in the event that his position should be shown to have been a proper one, sought an award of costs. Simply put, it is his case that this hearing was unnecessary, that [Miss Weir] has demonstrated a lack of reasonableness in her approach and that [CML] has been put to wasted cost as a result.  Miss Weir has acted unreasonably in her claim to damages and has advanced unarguable claims.  Her expressed insistence upon an apology from [CML] as a precondition of settlement was unreasonable and is likely to have closed her mind to a proper appreciation of the issues.  The issues dividing the parties, as they affected remedy, could and should have been settled.  [CML] has adopted an accurate and reasonable approach to the issue; Miss Weir rejected proposals and continued in the face of [CML’s] warning that this application would follow.  Mr Aston does not offer a summary of costs incurred.  The Tribunal proposes to exercise its powers under rule 14(3)(a) and to order [Miss Weir] to pay to [CML] the sum of £500.  Detailed assessment is not directed because that might produce an unintended result; one out of keeping with the perception of this Tribunal of the justice of the situation.”

The Appeal to this Appeal Tribunal

9.	Miss Weir has repeated her arguments as to why she claims that, in addition to the heads of compensation awarded by the employment tribunal, she is also entitled to damages under the three heads I have outlined.  She has also appealed against the tribunal’s refusal to award her interest and its order for costs.  Mr Aston has resisted her appeal.  I will deal with each of the five issues separately, but start by saying that Miss Weir based her argument on the familiar proposition stated by Baron Parke in Robinson v. Harman (1848) 1 Exch. 850, at 855, that:

“The rule of the common law is, that where a party sustains a loss by reason of a breach of contract, he is, so far as money can do it, to be placed in the same situation, with respect to damages, as if the contract had been performed.”

10.	That principle is not in question although, so stated, it would theoretically entitle the claimant to an indemnity against all loss flowing from the breach, however remote or unforeseeable.  The law of contract does not, however, permit such recovery.  Under the rule in Hadley v. Baxendale (1854) 9 Exch. 341 it only permits the recovery of damage (1) which may fairly and reasonably be regarded as arising according to the ordinary course of things from the breach, or (2) whose suffering was foreseeable as a result of special knowledge the contract breaker had at the time the contract was made.

(a)	The claim to damages for the loss of the state contribution to Miss Weir’s contracted- out pension

11.	Miss Weir’s point here is that, had CML not terminated her contract prematurely, she would have paid employee’s Class 1 National Insurance contributions until 6 July 2002.  Had she done so, the state would then have paid contributions either to her State Earnings Related Pension Scheme (“SERPS”) or (as would in fact have been the case) to the contracted-out “Appropriate Personal Pension” scheme she had had with Standard Life since 1988 (her “APP”).  She says that, had NI contributions for the full six months of her employment contract been paid, contributions totalling £482.48 would have been paid to her APP.  As her contract was terminated prematurely, her earnings from CML did not reach the lower threshold for the payment of NI contributions and so no state contributions were paid to her APP.  She therefore claimed the lost contributions of £482.48 as part of her earnings-based loss.  It was, she says, foreseeable by CML at the time it engaged her that she would paying Class 1 NI contributions on her salary, which would in turn result in state contributions either to her SERPS pension or to a contracted-out scheme such as her APP; and that it was also foreseeable that, if CML breached its contract and did not pay her salary, she would not be able to make the NI contributions so that in turn the state payments to her APP would not made.  Therefore she is entitled to be compensated for the loss that has caused her.

12.	Mr Aston disputed that Miss Weir is entitled to any damages on this basis, but conceded her claimed figure of £482.48 if in principle she is entitled to such damages.  I understood him to accept that the matters Miss Weir said were foreseeable by CML at the time she was engaged were so foreseeable, and I did not understand him to advance any reasoned argument as to why Miss Weir’s general proposition was in principle wrong.  In my view, her argument is correct and the head of damages claimed under this head is recoverable.  I conclude that the tribunal misdirected itself in saying that it was too remote.  I will award Miss Weir damages of £482.48 in addition to the damages awarded by the tribunal.

(b)	The claim to damages for the loss of a contribution-based jobseeker’s allowance

13.	The job-seeker’s allowance is a state benefit payable to unemployed persons who are looking for a job.  To be entitled to this benefit, the claimant must have (i) qualifying earnings relating to Class 1 contributions equal to at least 25 times the weekly lower earnings limit in one of the two tax years on which the claim is based (the contributions must actually have been paid, or have been treated as paid, not credited); and (ii) qualifying earnings relating to Class 1 contributions actually paid, or treated as paid or Class 1 credits, equal to at least 50 times the weekly lower earnings limit in both the tax years on which the claim is based. 

14.	Following Miss Weir’s dismissal on 25 January 2002, she was unable to find employment again until 2 September 2002, but was in the meantime ineligible for a jobseeker’s allowance because her entitlement based on Class 1 NI contributions had run out.  She says that, had CML paid her salary until 6 July 2002, she could and would have paid her Class 1 contributions and would have accumulated the necessary contributions in the tax years 2001/02 and 2002/03 to entitle her to a jobseeker’s allowance from 7 July to 1 September 2002.  She says the allowance she would have received during this period was £431.60.

15.	Miss Weir became unemployed again on 6 December 2002, and remained unemployed until 27 January 2003 when she began work as a self-employed consultant.  As she lacked the necessary Class 1 contributions, she was also unable to receive a jobseeker’s allowance during this period.  Had she been entitled to such an allowance, she says she would have received £377.65.

16.	She has since continued to work as a consultant, not as an employee, and so has continued to be unable to make Class 1 NI contributions.  The effect of this is that, if and when her engagement as a consultant ends, she will still be ineligible to receive a contribution-based jobseeker’s allowance.  She claims, therefore, that CML’s breach of contract is causing her a continuing loss.  In total, she claims £1,402.70.

17.	In my judgment, this claim is too remote and the tribunal was entitled so to hold.  A claim to a jobseeker’s allowance is based on the NI contributions paid by the claimant during two tax years, which need not be those years preceding the claim.  Moreover, the substance of this head of the claim is for compensation for a loss of income during a period following the termination of a fixed term contract, being a contract whose renewal the employee had no right to compel. I do not regard loss of this nature as arising under either of the two limbs of Hadley v. Baxendale.  I do not regard it as loss which can fairly and reasonably be regarded as arising according to the ordinary course of things from CML’s breach.  Nor did Miss Weir satisfy me that it was a head of loss which was foreseeable as a result of special knowledge that CML had at the time the contract was made.  In this connection, because a claim to a jobseeker’s allowance can be based on any two tax years’ contributions, proof of the relevant knowledge would require proof of a comprehensive knowledge by the contract breaker of the claimant’s previous contributions history and of the extent to which the claimant had previously drawn a jobseeker’s allowance.  There is, I understand, no basis for the suggestion that CML had such knowledge.  I agree with the tribunal that this head of Miss Weir’s damages claim was too remote.

(c)	The claim for damages to compensate Miss Weir for the loss of use of the net earnings that should have been paid to her

18.	The third head of loss Miss Weir claimed was for damages based on the proposition that, but for CML’s breach, each monthly salary payment it should have paid her could and would promptly have been paid into her Cheltenham & Gloucester savings account where it would have earned interest of 3.75%.  The inference from her calculations is that she would not have needed to spend a penny of her salary on living expenses, but would have financed those expenses exclusively from other sources.  The total claim is put at £51.71 down to 6 July 2002, continuing thereafter (until payment of her net unpaid salary) at a rate of £0.83 per day. 

19.	The essence of this claim is that it is one for damages for the delay in payment of money that CML was contractually obliged to pay Miss Weir.  To the extent that such claim was, as I understood Miss Weir to claim, for general damages under the first limb of Hadley v. Baxendale, she faces the difficulty that it has for long been the rule at common law that damages in the nature of interest are not recoverable for the late payment of a debt.  This was established by the decision of the House of Lords in London, Chatham and Dover Railway Co. v. South Eastern Railway Co. [1893] A.C. 429, a decision from which the House of Lords declined the invitation to depart in President of India v. La Pintada Compania Navigacion SA [1985] AC 104.  In the latter decision, the House recognised that there is no such rule precluding such damages being recovered by way of special damages, under the second rule in Hadley v. Baxendale.  I am, however, not persuaded that there is any factual basis on which Miss Weir can claim that this head of claimed loss is in the nature of special damage falling under the second rule.

20.	I confess to some surprise that Miss Weir, a solicitor, should have advanced this head of claim as one for damages, which I regard as mistaken.  I express no surprise that Miss Weir should wish to recover interest to compensate her for the delayed payments, but the usual basis on which claimants in such cases seek to recover interest is by way of an appeal to the court’s (or tribunal’s) discretion to award interest under section 35A of the Supreme Court Act 1981.  Had she made such a claim, it appears to me that the tribunal would have had a jurisdiction under regulation 3 of the 1994 Order to award interest, although the Chairman refused to do so.  I deal next with that head of Miss Weir’s complaint about his decision, but I dismiss her appeal against its refusal to award damages to compensate her for the delayed payment.

(d)	The appeal against the refusal to award interest under the 1981 Act

21.	I will deal with this shortly.  Miss Weir did not advance a claim to interest under the 1981 Act.  In paragraph 9 of his extended reasons, the Chairman refers to how, in the course of the argument, he raised the point that she might have made such a claim.  He then explained why, no such claim having been raised, he concluded that it would be wrong to allow it to be raised at such a late stage.  All I propose to say about that is that, in refusing to allow Miss Weir to raise a claim for statutory interest at that stage, the Chairman was exercising a discretion.  The award of interest under the 1981 Act is a matter of discretion, and it is possible that other Chairmen might have dealt with the matter differently.  I cannot, however, see that the Chairman misdirected himself in law in declining, as a matter of discretion, to entertain an unpleaded claim for statutory interest.  I dismiss Miss Weir’s appeal under this head as well.

(e)	The appeal against the costs order made against Miss Weir

22.	Had I been disposed to dismiss all other grounds of Miss Weir’s appeal, I regard it as likely that I would also have dismissed this ground.  In effect, the Chairman’s reasoning was that, as CML had made an offer to pay Miss Weir all that he considered she was entitled to, she had acted unreasonably in pursuing her claims for more to a contested hearing. 

23.	I have, however, allowed Miss Weir’s appeal on head (a) above, as a result of which she is entitled by way of compensation to a further sum of damages of £482.48.  That satisfies me that she was entitled to pursue the matter to the remedy hearing, since only by doing so could she recover that sum.  It is true that she also pursued other claims, which I have held that the Chairman was entitled to reject, but it does appear to me that her success before me on the head (a) claim puts a significantly different light on the costs order which the Chairman made against her. 

24.	I regard it as obvious that, had the Chairman been disposed (as in my view he should) also to have awarded Miss Weir the further head of £482.48 damages that she claimed, he would have taken a different view on the question of costs.  It would, in short, have been an odd exercise of discretion to order Miss Weir pay costs as the price of pursuing a remedy hearing at which she recovered more in damages than CML had been prepared to pay her.  In the circumstances, I consider that I can and should review the Chairman’s exercise of discretion as to costs.  In my judgment, in the light of Miss Weir’s success on the head (a) claim, the order for costs cannot stand and must be aside.  There are no other circumstances of which I am aware which would have justified an order for costs against either party, and so I will make none. 

Result

25.	I allow Miss Weir’s appeal to the extent that she claims further damages by way of compensation for the lost state contributions to her APP; and I award her an additional £482.48 damages under that head. I will, therefore, substitute for the damages of £8,419.68 awarded by the tribunal an award of damages in the sum of £8,902.16.  I will also set aside the tribunal’s order that Miss Weir must pay CML £500 costs.  I dismiss all other grounds of Miss Weir’s appeal.