Having inspected his tea leaves and no doubt with last year’s decision of the Court of Appeal in Edwards vs Chesterfield Royal Hospital NHS Foundation Trust fresh in his mind, his answer was that he thought there was considerable scope for change in the law relating to contractual damages.
In fulfilment of the oracle, on 27 May 2011, the national press proclaimed Sharon Shoesmith's successful 'appeal against sacking'. Shoesmith had been the director of children's services at Haringey London Borough Council, when Peter Connelly (Baby P) died. OFSTED prepared a report. Ed Balls, then the Secretary of State for Children, Schools and Families, directed the London Borough of Haringey to remove Shoesmith from her statutory duties under the Education Act 1996. The London Borough of Haringey dismissed Shoesmith without notice or a payment in lieu of notice in December 2008. Shoesmith applied to the Administrative Court to judicially review, among other things the lawfulness of:
• The directions given by Ed Balls, “which effectively ended her career”
• Haringey Borough Council’s decision to dismiss her Shoesmith’s application for judicial review in the Administrative Court failed, but her appeal to the Court of Appeal was successful.
The Court of Appeal made a declaration that both Ed Balls’ directions to Haringey Borough Council and Shoesmith’s dismissal by the Council were unlawful. The Daily Express and the Daily Telegraph talked of compensation of up to £1 million. But how could Shoesmith, on an annual salary of £133,000, expect to recover damages amounting to £1 million?
This is the position:
• There was no discrimination claim
• There was no uncapped unfair dismissal claim (eg for whistleblowing)
• The statutory cap on any compensatory award for unfair dismissal was £63,000 and
• Damages for breach of contract are generally limited to her loss of earnings during her notice period.
Although the Court of Appeal did not deal with further relief, lord Justice Kay, in the leading judgement, stated: “I am satisfied that the relief to which Shoesmith is entitled should include a formulation which extends to compensation… It seems to me the outer limits are, at the low end of the scale, a sum equivalent to three months’ salary and pension contributions (reflecting the contractual notice period) and at the high end a McLaughlin-type order…”
A McLaughlin-type order refers to an order made by the Privy Council, where it declared that an employee’s purported dismissal was ineffective in law to end his tenure in office and so he was “entitled to recover arrears of salary and payment of pension contributions until he resigns or his tenure of office lawfully comes to an end”. In McLaughlin’s case, a period of eight years had elapsed since his ‘ineffective dismissal’ and so he was entitled damages for loss of earnings for at least eight years.
Over eight years, Shoesmith’s salary of £133,000 makes £1,064,000 and hence, one supposes, the £1 million figure mentioned in the press. Lord Justice Kay strongly recommended that Haringey and Shoesmith attempt to negotiate a settlement and stayed the case for six weeks.
The matter will be remitted to the Administrative Court to consider further relief. This will happen some time after 8 July 2011. If settlement is not reached, it will be interesting to see whether the Administrative Court will award the bottom or the top end of the spectrum proposed by the Court of Appeal. It must be remembered that although it took eight years from McLaughlin’s dismissal to be determined by the Privy Council, it has taken less than three years for the legality of Shoesmith’s dismissal to be determined by the Court of Appeal.
But the Court of appeal’s decision may in turn be appealed to the Supreme Court. Although Shoesmith’s case was high profile and may result in a high award of compensation, its effect is likely to be limited. The courts can only judicially review the lawfulness and fairness of decisions of government ministers and departments, industry regulators, local authorities and other public bodies, so the Shoesmith decision will not affect employers in the private sector.
There is also some debate as to how far decisions made by public sector employers in relation to their employees can be judicially reviewed, especially where an appropriate alternative remedy can be found in an employment tribunal.
James Anderson (pictured) is a partner at Doyle Clayton Solicitors
