Johnson v. Unisys Limited

Factual and Procedural Background

The Appellant, a long-serving employee in the computer software sector and former director of the Respondent, was summarily dismissed in January 1994 after allegations of misconduct. No specific charges were put to him, and the company did not follow its own disciplinary procedures. The Appellant suffered a major psychiatric illness, required repeated hospitalisation, and has remained unemployed despite numerous applications for work.

He pursued an unfair dismissal claim before an employment tribunal, which found in his favour but, applying the statutory compensation cap then in force, awarded him £11,691.88 (after a 25 % reduction for contributory fault). In August 1997 he issued County Court proceedings seeking in excess of £400,000 damages in contract and tort, alleging that the manner of his dismissal breached an implied contractual term of mutual trust and confidence and caused his psychiatric injury and loss of earnings.

The County Court struck out the claim as disclosing no reasonable cause of action. The Court of Appeal upheld that decision. The present appeal to the House of Lords followed.

Legal Issues Presented

1. Whether a common-law claim for damages arising from the manner of dismissal can coexist with the statutory scheme for unfair dismissal under the Employment Rights Act 1996.
2. Whether the implied contractual term of mutual trust and confidence (or any analogous term) extends to the act of dismissal itself, thereby allowing recovery of damages beyond notice pay.
3. The continuing effect of Addis v Gramophone Co Ltd on recovery of non-pecuniary or reputational loss following wrongful dismissal, in light of subsequent authority such as Mahmud v BCCI.
4. Whether, in the alternative, a duty of care in tort could impose liability on the Respondent for psychiatric injury flowing from the dismissal process.
5. If a cause of action exists, whether the claimed loss is too remote.

Arguments of the Parties

Appellant's Arguments

• The contract of employment contained an implied term that the employer would not, without reasonable and proper cause, destroy or seriously damage the relationship of mutual trust and confidence; dismissal conducted without fair procedure breached that term.
• In principle, Mahmud v BCCI shows that damages for financial loss flowing from breach of such an implied term are recoverable notwithstanding Addis.
• The unfair dismissal legislation does not abolish common-law rights; Parliament did not intend to preclude additional remedies where statutory compensation is capped.
• Alternatively, the Respondent owed a duty of care to avoid foreseeable psychiatric harm, which was breached given the Appellant’s known psychological vulnerability.

Respondent's Arguments

• The claim is, in substance, an attempt to circumvent the unfair dismissal regime, whose compensation limits and procedural features represent Parliament’s chosen balance between competing interests.
• Addis v Gramophone Co Ltd precludes recovery of damages for the manner of dismissal; Mahmud is distinguishable because it concerned conduct during, not terminating, the contract.
• The contract expressly allowed termination on four weeks’ notice (or pay in lieu); implying a requirement of fair procedure contradicts that express term.
• No separate duty of care should be recognised where it would replicate or undermine statutory unfair dismissal protections.
• Even if liability existed, the psychiatric harm and consequent financial loss are too remote and not realistically provable.

Table of Precedents Cited

Court's Reasoning and Analysis

Delivering concurring opinions, Judge Bingham, Judge Nicholls, Judge Steyn, Judge Hoffmann and Judge Millett agreed that recognising a common-law claim for the manner of dismissal would conflict with Parliament’s detailed unfair dismissal framework.

The House accepted that the implied term of mutual trust and confidence exists but held that extending it to the act of dismissal would contradict the express contractual right to terminate on notice and undermine the statutory balance achieved by the Employment Rights Act 1996. Parliament deliberately:

• Excluded certain categories of employees (e.g. short-service or over-retirement-age workers);
• Capped compensatory awards (then £11,000; now £50,000);
• Allocated disputes to specialist employment tribunals operating swift procedures.

Allowing parallel common-law claims would “circumvent” these limits, nullify the statutory cap, and create incoherence. The House further concluded that no distinct tortious duty of care should be imposed, as that would achieve by tort what could not be achieved in contract.

On remoteness, the Lords noted serious evidential hurdles in proving that psychiatric damage flowed from procedural unfairness rather than the fact of dismissal, reinforcing the decision to strike out.

Holding and Implications

APPEAL DISMISSED.

The County Court’s strike-out and the Court of Appeal’s affirmance stand. The Appellant cannot pursue common-law damages for the manner of dismissal; his remedy lies solely under the unfair dismissal legislation. The decision preserves the exclusivity and statutory limits of employment tribunal compensation and confirms that the implied term of mutual trust and confidence does not extend to the act of dismissal itself. No new precedent expanding employer liability was created.