Breach of contract claims and the statutory cap: Fraser v HLMAD Ltd Court of Appeal

Back in 2004, an employment tribunal found in favour of Fraser in his claim for unfair dismissal and wrongful dismissal (breach of contract). He was awarded more than £16,000 in damages for unfair dismissal and more than £80,000 in damages for wrongful dismissal.

Unfortunately for the claimant, the maximum award that the tribunal can make for breach of contract is £25,000. This case concerned Fraser’s attempts to claim the £55,000 balance of his breach of contract award in the High Court.

Excess claim

Since 1994, it has been possible to bring breach of contract claims arising from a termination of employment in the tribunal. This is usually a more attractive forum because of the speed at which claims are dealt with, and the limited risk on costs. The main disadvantage, however, is that the tribunal’s jurisdiction is limited to awarding a maximum of £25,000 for a breach of contract claim. For this reason, claimants sometimes attempt to pursue a claim in the High Court for the excess.

In this case, Fraser expressly reserved the right to bring a claim in the High Court for any excess awarded by the tribunal over the cap of £25,000. Before the claim was decided in the tribunal, he started proceedings in the High Court for the excess, and did so without withdrawing his claim at the employment tribunal.

High Court ruling

The High Court held that it was not sufficient for Fraser to have reserved the right to bring a claim in another forum in his ET1. To bring a further claim, he had to ensure that the tribunal did not make a ruling on his claim. The High Court held that although Fraser was only claiming the excess over the statutory cap, it would be “incongruous and contrary to principle” to allow him to litigate his claim a second time. The High Court struck out the proceedings for wrongful dismissal. Fraser appealed.

The appeal was dismissed. The Court of Appeal was satisfied that once a tribunal had given judgment on a claim for wrongful dismissal, whether granting relief or dismissing the claim, it was not possible for a claimant to make a further claim on the same grounds, either before the tribunal or elsewhere.

The cause of action for wrongful dismissal could not be split into two causes of action, one for damages up to £25,000, and another for the balance. Further, the Court of Appeal was satisfied that it is not open to a claimant to avoid the operation of this legal principle by purporting to reserve a right to make a second claim in the future.

Key points

  • Claimants cannot gain judgment in the tribunal and then pursue a claim in the High Court for the excess above the statutory cap. If a claimant intends to pursue their claim in the High Court to avoid the impact of the statutory cap, they must withdraw their claim in the employment tribunal prior to the tribunal making a judgment.

  • An attempt by a claimant to reserve the right to pursue the claim in an alternative forum will not be effective if the claim is not withdrawn from the tribunal and the tribunal goes on to make a judgment.

  • The Court of Appeal recommended that the tribunal’s literature should be amended to make it clear that if claimants anticipate that their breach of contract claim is worth more than £25,000, then they should bring the claim in the High Court rather than the employment tribunal. The court also recommended that the level of statutory cap of £25,000, set in 1994, should be reviewed.

What you should do

  • Be aware that this case has implications for counter-claims. If the value of the counter-claim is likely to exceed the cap of £25,000, it may be advisable for the employer to bring a separate claim in the High Court, where any award made will not be subject to the £25,000 cap.

Rating: Two out of five stars

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By Joe Glavina, legal director, and Phil Williams, associate, Addleshaw Goddard

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