Rose Gibb V Maidstone & Tunbridge Wells NHS Trust [2010] EWCA Civ 678

In this case the appellant (G) appealed against the dismissal of her claim for balance of monies owed or, alternatively, damages pursuant to the terms of a compromise agreement entered into with the respondent NHS Trust. The defendants have resisted making payment on the basis that to do so would be ultra vires as the agreed figure was “irrationally generous”.  The basis of the appeal was that, if the compromise was ultra vires she had a remedy in restitution on the footing that in the events which had happened the Trust had been unjustly enriched at her expense or, in the alternative that the Trust was in breach of its obligation of trust and confidence imposed by her contract of employment.

On the point of whether the matter was ultra vires the Court of Appeal commented that it was notable that the defendant decision makers were seeking to “escape the coils of a contractual obligation it has entered into” by asserting their own behaviour was Wednesbury irrational. Following the decision in Newbold v Leicester City Council (1999) the Court of Appeal held that it was not possible for a judge to reach his own conclusions as to what financial prudence should have been applied by the Trust but rather to determine whether it was Wednesbury unreasonable. It was not possible on the fact to determine that the terms of the compromise agreement were Wednesbury unreasonable because the alternatives to a compromise agreement were not clear-cut or implied financially precise outcomes, neither were any anticipated saving of costs. It was not for the Court to determine that the compromise agreement was ultra vires because it exceeded the calculation of the cost of an employment claim conceded at full value. The Court of Appeal, quoting the headnote in Telephone Information Services v Wilkinson (1991), highlighted that a claim for unfair dismissal was not to be equated to a common law action which could settle for a monetary award. Instead the applicant has a right to have the matter determined and can proceed to judgment purely on that basis, unless the defendant agreed to admit full liability. In this case the Court of Appeal concluded that the Judge’s reasons for dismissing the earlier claim were flawed as it would be problematic to suppose that the Trust might have been prepared not only to offer the maximum amount recoverable through tribunal proceedings, but also to admit that the appellant’s dismissal was unfair. Finally the Court of Appeal was of the view that matters such as previous good years of service and chances of re-employment could not be regarded as legally irrelevant when setting the value of a compromise agreement. There was no reason why an employer such as the Trust,  when deciding to terminate a long-standing employee’s contract in difficult and controversial circumstances, should be obliged to disregard past service and an employee’s future likely difficulties when settling the terms of the severance. In such cases, a reasonable employer was not limited to the replication of the statutory maximum available to the employee through legal redress. The constraint of rationality allowed some degree of generosity for the sake of good relations and mutual respect between employer and employee: not only for the sake of the employee in question, but also for the sake of the employer’s reputation and standing. Accordingly, it had not been shown that the compensation package provided to the appellant amounted to irrational generosity.
On the appellant’s claim that the Trust had been unfairly enriched by the decision not to honour the compromise agreement, the Court of Appeal took the view that the earlier judgment was flawed on the matter of causation. Although it recognised that Ms Gibb had received notice that the Trust did not intend to honour the agreement prior to the expiry of time to issue proceedings in the Employment Tribunal, they did not accept that this was sufficient to defeat the claim for unfair enrichment. The Court of Appeal concluded that the case for unjust enrichment was “well made out” and adopted the reasons given by the appellant, namely “the effect of the judge’s ruling is that although the Trust was willing to pay a substantial sum of money for the benefits conferred under the compensation agreement, and has received and retained these benefits, the claimant has no remedy.  That is unjust.” It quantified the Trust’s benefit obtained by the appellant’s foregoing her claim for compensation for unfair dismissal as being worth £69,590.
On the matter as to whether it was a breach of contract, the Court of Appeal upheld the earlier judgment only to the extent that the breach of contract was unactionable in common law as the correct remedy was to action it through the Employment Tribunal. Johnson v Unisys [2001] applied.

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