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Fair Treatment and Foreseeability: A Game of Two Halves in Yapp v Foreign And Commonwealth Office

By Chris Milsom

The setting of the Court of Appeal’s recent decision in Yapp v Foreign and Commonwealth Office [2014] EWCA Civ 1512 may be exotic, but the principles are universal. In upholding the decision of the High Court, the CA has illustrated the potency of the principle of fair treatment in employment. In allowing the FCO appeal, however, it emphasises the high threshold which employees must satisfy in respect to foreseeability of psychiatric injury.

The Facts

The background to the claim was widely reported leading in turn to Mr Yapp launching a successful libel action against the Mail on Sunday. In summary, in 2007 the Claimant was the appointed British High Commissioner in Belize. His letter of appointment for the post stated that he was “entitled to fair treatment”. Following a “pastoral visit” by a human resources in April 2008, Mr Yapp was given an informal warning for having an “arrogant management style.”

In June 2008 he was withdrawn from his post on "operational" grounds with immediate effect and suspended pending investigation of allegations of misconduct. At the point of suspension and withdrawal, he was not given the opportunity to respond to the allegations, which were said to fall into two categories:-

  1.    Inappropriate sexual conduct(the principal source of these allegations was a single telephone conversation with an opposition politician); and
  2.    The Claimant’s treatment of his own staff.

An investigation was undertaken which concluded that there was likely to be a disciplinary case to answer.

The same person acted as investigator and disciplinary officer. He concluded that some of the allegations were well-founded but that the allegations of inappropriate sexual conduct were not. Mr Yapp was issued with a final written warning.

Mr Yapp informed the FCO that he had been diagnosed with depression. In November 2008 his suspension was lifted but he commenced a period of sick leave, during which he was diagnosed with coronary artery disease, requiring triple bypass surgery in April 2009. He remained on sick leave until his retirement in March 2011, following which he lodged proceedings asserting that his removal and its aftermath amounted to a breach of contract and the common law duty of care.

The High Court Decision

Liability

The High Court determined that the FCO had breached its obligation of fair treatment in failing to conduct basic analysis of the allegations before withdrawing the Claimant from his post and suspending him. Cranston J’s judgment at [82] forms the lynchpin of the judgment below and bears repeating in full:-

Fundamental to fair treatment is an entitlement to natural justice and an opportunity for the head of mission to put his or her side of the story. Indeed a golden thread through the case law on fair treatment is that those liable to be affected by a decision must be given prior notice of it so that they can make representations. A corollary is that any representations must be taken into account by the decision-maker. The greater detriment a decision is likely to cause the more demanding the duties. Where a decision-maker is entrusted with information in confidence relevant to its decision, he or she must balance the need for disclosure to the person affected against respecting the confidence. The law recognises exceptions to the duty to disclose, such as the need for prompt action. When urgency demands a relaxation in the requirement of prior notice, the obligation of fair treatment requires the decision-maker to engage in an evaluative exercise as if the person affected had made representations. Another principle of fair treatment is that against bias, real or apparent. It may not be appropriate for decision-makers to be involved in a determination reviewing what is effectively their earlier decision, not least because of the appearance of not bringing to it an open mind.

“Fair treatment”, on the facts at hand, was incorporated into the contract by both express terms contained in the letter of appointment and by the implied term of trust and confidence. It demanded that the FCO “inform the claimant of the allegations and take into account his critique of them.” Further the FCO was obliged to disclose the identity of the source of the allegations, because “Fair treatment in this case trumped confidentiality, which could not override the very important right of the claimant to know what was alleged against him and to have his responses fairly evaluated before a judgment was made” [118]. It was held that elementary investigation would have demonstrated some of the less serious allegations were untrue and some of the more serious ones could be discounted. Suggestions of reputational damage to the UK, relied on to support the immediate withdrawal were, on analysis, overblown.

Finally, the fact that the same person conducted both the investigation and the disciplinary hearing was said to contravene the principle of natural justice, supported in part by the revised ACAS Code of Practice.

Damages

The arguments on remoteness of damage centred on the Claimant’s depression. The FCO relied on Deadman v Bristol City Council [2007] IRLR 888 and others to submit that Mr Yapp, a man who exhibited robustness in other roles, could not be reasonably anticipated to suffer psychiatric injury as a result of the withdrawal / suspension. It relied in part on Mr Yapp’s contact with a Ms Nelson, head of health and welfare in the FCO, who arranged for counselling and was told that Mr Yapp was taking sleeping tablets. Ms Nelson’s evidence at trial was that she arranged counselling not because the Claimant was seen as vulnerable but because proceedings were likely to take some time. His reactions were said to be a not unusual response to investigations and disciplinary proceedings; whilst many exhibited similar responses the vast majority did not develop depression.

The High Court did not accept the FCO submissions, distinguishing Deadman on the basis that it concerned a “minor breach of the disciplinary procedure” and suggesting the facts were akin to Gogay v Hertfordshire CC [2000] IRLR 703. In Gogay, the CA held that “it was reasonably foreseeable that a knee-jerk reaction by employers in the implementation of disciplinary procedures, carried out without any proper analysis and leading to serious adverse consequences for an employee, might cause psychological damage.”

The Court of Appeal Decision (Underhill LJ giving lead judgment)

The FCO appealed the findings as to breach of contract and foreseeability of injury.

The Breach of Contract Appeal

The principle of fair treatment, if it had not been an express term, would have been implied: Chabra v West London Mental Health NHS Trust [2014] ICR 194 per Lord Hodge at [37]. The CA further held that the breach of contract appeal was unsustainable in relation to Mr Yapp’s immediate withdrawal from post: “It is indeed rather surprising to see the FCO making a decision of this gravity on the basis of a single telephone conversation with a politician in the host country: even apart from the question of fairness to the post-holder, one might have expected some consideration of whether the informant might have his own agenda or be otherwise unreliable:” [63].

The CA did, however, accept the FCO’s submissions that having the same person conduct the investigation and chair the disciplinary, was not unfair, whilst accepting that they had “no practical consequences” as to the outcome on the specific facts. It stated that whilst separating the task of primary fact-finding from decision-making may help to serve transparency “there can also be disadvantages, particularly where (unlike in Court proceedings) the decision-taker does not himself or herself see the witnesses and is reliant on the investigator’s assessment of them:” [69].

Personal Injury/Foreseeability

The FCO maintained that psychiatric injury was too remote. The CA made an important which is often missed: a question of reasonable foreseeability is not a corollary to a common law duty of care complaint but a pre-requisite. “If the risk of psychiatric injury is too remote no duty to take steps to avoid it will arise, and there thus can be no question of breach:” [58].

The CA proceeded to conduct a sweeping review of the authorities ([84]-[118]) including Gogay which was said to provide no real guidance as to the approach to remoteness. By contrast, there was said to be clear authority in the form of Croft v Broadstairs and St Peter’s Town Council [2003] EWCA Civ 676 to the effect that “in a person of ordinary robustness, a nervous breakdown would not, medically at least, be a foreseeable result of a reprimand as to her conduct:” (Potter LJ at [73] in Croft). The distinction advanced by the Claimant between cases concerning the “normal pressures of the job” and “one-off/unfair disciplinary sanctions” could not be accepted. This was said to be in keeping with Johnson v Unisys [2003] 1 AC 518.

Having reviewed the authorities, Underhill LJ identified the following principles which are likely to become essential reading for practitioners:-

  1.           In considering, in the context of the common law duty of care, whether it is reasonably foreseeable that the acts or omissions of the employer may cause an employee to suffer a psychiatric injury, such an injury will not usually be foreseeable unless there were indications, of which the employer was or should have been aware, of some problem or psychological vulnerability on the part of the employee;
  2.        That approach is not limited to cases of the Hatton type but extends to cases where the employer has committed a one-off act of unfairness such as the imposition of a disciplinary sanction;
  3.      However, in neither kind of case should that be regarded as an absolute rule: Hatton contains no more than guidance, and each case turns on its own facts;
  4.      In claims for breach of the common law duty of care it is immaterial that the duty arises in contract as well as tort: they are in substance treated as covered by the tortious rules. In order to establish whether the duty is breached it will be necessary to establish whether psychiatric injury was reasonably foreseeable and if that is established no issue as to remoteness can arise when injury eventuates;
  5.         In claims for breach of a contractual term (including “the Malik term”) the contractual test of remoteness will be applicable.

In light of those principles, Underhill LJ quite properly questioned what a distinct contractual claim can add where a breach of the common law duty of care can be established and he assessed the question of remoteness on the basis of the tortious test which is more favourable to claimants. He found the evidence wanting and ultimately concluded that Cranston J was wrong to conclude that psychiatric injury was a reasonably foreseeable consequence of withdrawal: “It will in my view be exceptional that an apparently robust employee, with no history of any psychiatric ill-health, will develop a depressive illness as a result even of a very serious setback at work:” [125]. There was nothing sufficiently egregious on the facts to render them an exception to that rule of thumb. Davis LJ agreed in a short concurring judgment “in the absence of the FCO having any prior awareness, or reason to be aware, of any particular susceptibility to stress or other relevant vulnerability…(A)n employer, in a context such as the present, is, after all, entitled to assume that an employee is of “reasonable fortitude”…in the absence of knowledge, actual or constructive, indicating the contrary:” [156].

The CA did not accept that this was a matter of primary fact but one of judgment which an appellate court was just as well-placed to make as the first instance court. As such, the CA overturned the decision in relation to remoteness and the common law duty of care. Remedy was remitted.

Observations

The Malik term has become a robust weapon in the arsenal of any practitioner and the common law duty of care has marched in step. Given the introduction of fees for ET litigation, and the continued impression in some quarters that compensatory awards fail to reflect actual loss even in the event of success, practitioners should become increasingly open to the possibility of High Court litigation. It also appears that action short of dismissal (such as suspension) receives greater scrutiny in the civil courts than the ET, where suspension is typically seen, erroneously, as a neutral act (see by example Elias LJ in Crawford v Suffolk Mental Health Partnership NHS Trust [2012] IRLR 402). The dicta of Cranston J as to fair treatment which remains largely intact should therefore be welcomed by employees. Conversely, it is now clear that in the absence of clear indications as to vulnerability, foreseeability is a high bar. This is not typically the area in which appellate intervention would be expected: questions of remoteness are typically a matter of impression for the first-instance court (see Attia v British Gas plc [1988] QB 304 et al). The CA has therefore set clear parameters which must be borne in mind. In particular, it is important to remember that “stress” is not to be equated with psychiatric injury: it is “merely the mechanism which may but usually does not lead to damage to health:” Hale LJ at [27] in Hatton v Sutherland [2002] ICR 613.

Employees may feel as though they are presented with a cul-de-sac: where there is evidence of prior vulnerability, there are likely to be different hurdles in pinpointing causation. By way of practical advice to employee clients, notifying an employer as to health concerns is therefore of paramount importance.

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