[1909] A.C. 488 (House of Lords)
This case limits recovery of damages for wrongful dismissal. If it establishes a rule that applies only to employment contracts, then I would suggest that it is difficult to justify. It seemed from cases such as Bliss v. South East Thames Regional Health Authority [1985] I.R.L.R. 308 that it did indeed establish a special rule for employment contracts. The case has however been reinterpreted in Malik v. BCCI, where Lord Steyn at least treats it as being consistent with general contractual principles (but Lord Nicholls still sees it as laying down a special rule).
Facts, held, notes, later cases
List of cases, legal top-level page, home page, labour law, contract of employment references, wrongful dismissal, wrongful dismissal references
An employee who was paid a small salary and a larger commission was wrongfully dismissed. (He should have been entitled to 6 months' notice, and was actually given 6 months' notice, but was prevented from working it out because his successor was appointed to take over immediately). The issue was as to quantum of damages.
Top of case, List of cases, legal top-level page, home page, labour law, wrongful dismissal, contract of employment references, wrongful dismissal references
He was entitled to his salary and reasonable commission (the latter based on what his successor had actually earned) for the 6 month notice period. He was not entitled to (i) damages for the humiliating manner of his dismissal, or (ii) any loss of reputation leading to future difficulty in employment. The position regarding (i) is probably the same now as it was in 1909, but (ii) must be reconsidered in the light of Malik v. BCCI (at any rate on Lord Nicholls of Birkenhead' view).
Top of case, List of cases, legal top-level page, home page, labour law, wrongful dismissal, contract of employment references, wrongful dismissal references
1. The court only considers contractual entitlements, and not, for example, any discretionary bonusus which the employee might have received. If the employer is not under a contractual obligation to provide the bonus, the loss of it to the employee does not follow from any breach by the employer.
2. Actors, however, may be able to get damages for loss of their reputation, since the opportunity to promote their reputation may be regarded as an essential part of the employment contract.
3. If this is was a remoteness rule, then it can change over time (especially limb 2 of Hadley v. Baxendale). Limb 1 of Hadley v. Baxendale allows recovery for losses such as flow naturally from the breach; limb 2 covers losses such as may be supposed to have been in the contemplation of the parties as the result of the breach.
If Addis established a public policy rule, then whatever it established may be set in stone, and not changing over time. The case itself is rather unclear, as there is no mention of public policy, and only Lord Gorrell mentioned remoteness, basing his decision on (although he did not expressly mention the case) the first limb of Hadley v. Baxendale. But there were other authorities, cases apart from employment contracts, suggesting that there is a rigid rule of law (which would not therefore change with time). For example, in Hobbs v. London & South Western Railway Co. (1875) L.R. 10 Q.B. 111 Mellor J. said (at 122) that -
'... for the mere inconvenience, such as annoyance and loss of temper, or vexation, or for being disappointed in a particular thing which you have set your mind upon, without real physical inconvenience resulting, you cannot recover damages.'
Subsequent employment law authorities, however, make it pretty clear that Addis established a public policy rule, but it is still unclear what the public policy rule is - see further Malik v. BCCI.
4. In so far that any principle can categorically be discerned from Addis, it is against the award of exemplary damages in contract (they can be awarded in tort). It is by no means clear, however, that the employee was attempting to claim exemplary damages.
Top of case, List of cases, legal top-level page, home page, labour law, wrongful dismissal, contract of employment references, wrongful dismissal references
During the 1970s, a number of holiday cases allowed damages for mental distress (e.g., Jarvis v. Swans Tours [1973] 1 Q.B. 233 and Jackson v. Horizon Holidays [1975] 1 W.L.R. 1468), thereby relaxing any rigid rule of law in Hobbs.
In Jarvis v. Swans Tours, where the plaintiff had a very miserable holiday (this is taken from the headnote):
The plaintiff went on the holiday but he was very disappointed. In the first week the house party consisted of only 13 people, and for the whole of the second week the plaintiff was the only person there. There was no welcome party. The ski-runs were some distance away and no full length skis were available except on two days in the second week. The hotel owner did not speak English and in the second week there was no one to whom the plaintiff could talk. The cake for tea was only potato crisps and dry nutcake. There was not much entertainment at night; the yodler evening consisted of a local man in his working clothes singing a few songs very quickly, and the hotel bar was an unoccupied annexe open only on one evening.
Of course, the problem was that the plaintiff could not easily point to a financial loss, but the CA awarded damages for distress (greater than the cost of the holiday). Hobbs was regarded as outdated (Denning) or even wrong (Edmund Davies L.J.). In Heywood v. Wellers [1976] Q.B. 446 the CA simply applied remoteness principles (where distress damages were awarded where solicitors negligent in failing to enforce a non-molestation order).
The reasoning from the holiday cases was extended to employment contracts in Cox v. Philips Industries Ltd. [1975] I.R.L.R. 344 (where however the reasoning is not very detailed). Lawson J seems to have assumed that the principle is one of remoteness (which are not static, but can vary over time), and that Jarvis v. Swans Tours allowed in principle damages for stress.
In Cox, really the only damages were for stress, etc., because there was no financial loss - the employee was demoted in terms of responsibility but not pay. However, he "became very depressed, extremely anxious and very frustrated. He began to have periods of sickness and depression."
In Bliss v. South East Thames Regional Health Authority [1985] I.R.L.R. 308, the conventional view was restated, and Cox v. Philips Industries Ltd. was overruled. In Bliss, the CA clearly took the view that Addis established a rule of public policy, not of remoteness, a view also taken by the CA in O'Laoire v. Jackel International Ltd [1991] ICR 718, [1991] IRLR 170 (C.A.), which followed Addis and Bliss, refusing to allow recovery to an employee for loss of his reputation or injury to his feelings.
However, the principle established in Addis was restricted by the HL in Malik v. BCCI, and the courts have also shown no enthusiasm to extend its restrictive approach to damages to other aspects of wrongful dismissal by analogy. For example, Stapp v. Shaftesbury Society [1982] I.R.L.R. 326 (C.A.) and Robert Cort & Son Ltd v. Charman [1981] I.R.L.R. 436 (E.A.T.) suggest that damages for wrongful dismissal can include loss of the right to complain of unfair dismissal which the employee would have had if he/she had not been summarily dismissed. In Shove v Downs Surgical plc [1984] 1 All ER 7, [1984] ICR 532, [1984] IRLR 17, an employee's liability to pay income tax (on the damages) was not regarded by the QBD as too remote in a wrongful dismissal action, although interestingly, Cox v. Philips Industries Ltd. was not regarded as a helpful authority for the employee.
Top of case, List of cases, legal top-level page, home page, labour law, wrongful dismissal, contract of employment references, wrongful dismissal references
These notes were last updated on 09 Nov 97.
Mail Paul Todd: SLAPNT@cf.ac.uk