UK: Stress Claim Arising Out Of Breach Of Contract Of Employment

Last Updated: 18 October 2007
Article by Simon Cradick

In Deadman v. Bristol CC the Court of Appeal considered whether a Harassment Policy formed part of the Claimant’s Terms of Employment and, if so, whether a breach could result in a claim in damages for stress.

Deadman v. Bristol City Council

[2007] EWCA Civ. 822

Background

Prior to 1998, the Claimant had worked for the Council for over 30 years, most recently as a manager. On 05.02.98, a female employee came to his office where she alleged she was sexually harassed. She made a formal complaint. The Council’s Harassment Policy provided for the complaint to be investigated by a panel of three but instead a panel of two was convened, one of whom was the Claimant’s line manager. The panel found against the Claimant but he successfully challenged the decision as having been in breach of procedure. A letter dated 06.05.98 was then left on the Claimant’s desk informing him that, as the complaint was unresolved, there would be a fresh investigation. He went sick complaining of stress and depression and had not returned to work.

The Claimant pursued a claim both in negligence and for breach of contract, arguing that the Council’s Harassment Policy was part of his Terms of Employment and that the Council had breached it. At first instance, the Judge found that the Council had not acted negligently but that it had breached terms of the Claimant’s contract of employment and that those breaches had caused his illness. The Defendant appealed.

Contractual Terms of Employment

The Claimant had been issued with a standard Statement of Terms and Conditions in compliance with the Employment Rights Act 1996. Under para 13 of the Terms, reference was made to rules and agreements made by the Council affecting the Claimant’s employment, including matters such as an employees’ code of conduct, retirement age, maternity rights, disciplinary procedures, grievance procedure and equal opportunity policies. Some of these were clearly couched in language of a kind appropriate to a contractual term whereas other were not. In 1997, the Council published an "Integrated Equalities Policy" which included a section on harassment, including a section entitled "Procedure for Stopping Harassment in the Workplace."

The Court of Appeal noted that a standard contract of employment contains various terms including :

  • an implied term of mutual trust and confidence that neither part will, without reasonable and proper cause, conduct himself in a manner likely to destroy or seriously damage the relationship of trust and confidence existing between employer and employee.
  • a general duty to take reasonable care to avoid causing physical or mental harm to employees, which was similar to but not necessarily identical to the common law duty.

The Court held that, although the Integrated Equalities Policy could not as a whole be construed as being incorporated into the contract of employment, the Procedure for Stopping Harassment in the Workplace was different. It contained sections of a detailed and formal nature which could be seen as Terms of Employment.

Breach of Duty

The Court of Appeal concluded that the Judge had been correct to find that the Claimant’s injury had not been foreseeable so that there could be no claim in negligence. Although the Council may have known that the Claimant had been upset by the process, it could not reasonably have known that the decision to re-investigate would cause injury.

The Court upheld the Judge’s decision that the Council was in breach of contract by convening a panel of two rather than three members to carry out the original investigation. However, the Court of Appeal disagreed with the trial judge that the breach of contract caused a reasonably foreseeable risk of injury. To recover damages for personal injury from a breach of contract, the Claimant must establish that, when the contract was agreed, the parties could have reasonably contemplated that an injury would occur if that breach of contract took place. The Court could not accept that either the Claimant or the Council could have contemplated that a decision to convene a panel of two rather than three members would have caused a psychiatric injury. Accordingly, although the Council was in breach of contract, the loss was too remote and the claim failed.

Although the claim failed, the case may prove important because it may encourage other Claimants to pursue claims in breach of contract as an alternative to negligence. An employer’s failure to follow prescribed procedural rules may well amount to a breach of contract as a result of Moore-Bick LJ’s comment:

"Where an employer has published and implemented with the concurrence of employees’ representatives formal procedures providing for the manner in which complaints are to be investigated, it will usually become a term of the contract of employment that those procedures will be followed unless and until withdrawn by agreement. The fact that in this case the procedures were made in the implementation of a non-contractual policy is in my view of no significance. What matters is whether they were in fact adopted as part of the contract of employment….."

It follows that, among others, harassment, bullying and discrimination policies and the procedure for dealing with such complaints may well be deemed to be terms of an employee’s contract of employment, in which event any departure from the policy could be deemed a breach of contract. A Claimant would still have to prove, in effect, that a breach of contract gave rise to a reasonably foreseeable risk of injury, although the test would be slightly different from that in common law. Ultimately, I do not consider that this case will assist Claimants and advice to employers will remain that, unless an injury was clearly foreseeable, liability should be denied.

The Court did make a potentially important comment on causation. The Council had argued that, in the event that damages were awarded, the Court should apportion damages between the loss caused by the breach of contract or duty and other causes. The Court emphasised that, if a Defendant wished to raise causation in this manner, it should do so in the Defence so that the appropriate evidence could be adduced. In fact, in the absence of a clear intervening or supervening event, the Court was entitled to assume that the loss would flow from the breach unless the Defendant adduced evidence to the contrary.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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