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IN CONFIDENCE
s is a judgment to which the Practice Note of the Master of the Rolls dated 19 December 2001
applies. This is a draft of the judgment to be handed down on Friday 19 December 2003 at 10am in
(Court No 66. It is confidential to Counsel and Solicitors, but the substance may be communicated toI
clients not more than one hour before the giving of judgment. The official version of the judgment will]
be available from the shorthand writers once it has been approved by the judge.
The court is likely to wish to hand down its judgment in an approved final form. Counsel shouldI
therefore submit any list of typing corrections and other obvio in writing (Nil returns areI
required) to the clerk to Lord Justice Brooke, by fax to or by E-mail toI
“}, by 12 noon on Thursday 18" December, so that changes can be
incorporated, if the judg
cepts them, in the handed down judgment.
Neutral Citation Number: Double-click to add NC number
Case No: A2/2003/0623
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN’S BENCH DIVISION
Judge Mackay
Royal Courts of Justice
Strand, London, WC2A 2LL
Date: 19th December 2003
Before :
LORD JUSTICE BROOKE
e-President of the Court of Appeal, Civil Division)
and
LORD JUSTICE SEDLEY
Between :
MOEZE LALJI Claimant/
Appellant
- and —
POST OFFICE LIMITED Defendant/
Respondent
Adrian Davies (instructed by Sykes Anderson Solicitors) for the Appellant
David Griffith-Jones QC & Shaen Catherwood (instructed by Legal Department of the
Royal Mail) for the Respondent
Hearing date : 4" December 2003
DRAFT JUDGMENT
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Court of Appeal Unapproved Judgment: Moeze Lalji v Post Office Limited
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Lord Justice Brooke :
1. This is an appeal by the claimant Moeze Lalji against an order of Judge
Mackay, sitting as a High Court judge, whereby he struck out paragraphs 11-
14 of the particulars of claim in this action and directed that summary judgment
be entered for the defendants, Post Office Ltd (formerly known as Post Office
Counters Ltd) on Mr Lalji’s claim for remuneration during his suspension and
on his claim for losses arising from the closure of his business.
2. Mr Lalji was appointed sub-postmaster at the [
Epsom by an agreement made between the parties in January 1993. In July
1997 events occurred which gave rise to an investigation by the defendants into
certain financial and accountancy aspects of his sub-postmaster’s business. On
24" July he was suspended from office. On 9"* September 1997 the defendants
told him that although no criminal charges were to be brought, there were
matters outstanding which required further investigation. They invited him to
an interview, but he never went.
3. On 23" September 1997 he was warned that it was possible that his contract
might be terminated summarily not only because of the accounting problems,
but also because Post Office books had been pledged against loans and
disbursements of money contrary to the express terms of his contract. He was
again invited to attend an interview. Again he did not attend. On 30" October
1997 his contract was terminated summarily.
4. Mr Lalji commenced the present action on 17" April 2002. By his particulars
of claim he claimed (i) remuneration of £5,445.28 for the period between his
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suspension and the eventual termination of his contract; (ii) £4,083.96, being
three months’ salary in lieu of notice as damages for wrongful dismissal; (iii)
damages for loss sustained by the rest of his ‘business arising out of
the defendants’ wrongful behaviour; (iv) damages because the defendants’
conduct caused or materially aggravated hi In this
context complaint was made that they had dismissed him in a harsh and
humiliating way which imputed dishonesty on his part and made it all but
impossible for him to find another position.
5 In their defence the defendants relied on a number of the terms of their
agreement with Mr Lalji:
“1(10) ... The agreement may be determined by Post Office
Counters Ltd at any time in case of Breach of Condition
by [the Sub-postmaster], or non-performance of his
obligation or non-provision of Post Office Services, but
otherwise may be determined by Post Office Counters
Ltd on not less than three months notice.
17(15) A Sub-postmaster must not borrow from or lend money
to any Post Office employee. Nor should he become
security for any Post Office employee in raising a loan.
The loaning of money to persons drawing pensions or
allowances on the security of their order books is also
strictly forbidden.
19(4) A Sub-postmaster may be suspended from office at any
time if that course is considered desirable in the interest
of Post Office Counters Ltd in consequence of his (a)
being arrested, (b) having civil or criminal proceedings
brought or made against him, (c) where irregularities or
misconduct at the office(s) where he holds
appointment(s) have been established to the satisfaction
of Post Office Counters Ltd, or are admitted, or are
suspected and being investigated.
19(5) Where a Sub-postmaster is suspended his remuneration
in respect of any period of suspension will be withheld
so long as such suspension continues.
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19(6) On the termination of the period of suspension whether
by termination of contract or reinstatement, the Sub-
postmaster’s remuneration in respect of the period may,
after consideration of the whole of the circumstances of
the case, be forfeited wholly or in part. If remuneration
is paid any rent or other expenses which may have been
paid to him in respect of the continued use of his
premises for Post Office purposes during the period of
suspension will be deducted.”
6. They also referred to clauses 18(1) and (2) which give a sub-postmaster an
express right to give a written explanation if allegations are made against him
and/or to meet the Retail Network Manager, accompanied by a friend, to
discuss the allegations.
7. It is unnecessary for the purposes of this judgment to refer to the defence in
any great detail. It is sufficient to say that the defendants asserted that the
audit conducted on 24" July 1997 gave them reasonable grounds to believe
and/or suspect that Mr Lalji was holding Pension and Allowance books against
the price of goods in his other business, and that there were deficiencies in his
accounts. This constituted, they said, grounds for his suspension pursuant to
clause 19(4). Following further investigations, and Mr Lalji’s non-attendance
at the interview he was offered, coupled with his failure to provide any
explanation, the defendants decided to terminate his contract summarily “by
reason of the said accounting irregularities and the holding of Pension and
Allowance books against debts”. In a counterclaim the defendants claim
deficiencies of £2,730,36 against which they set off a sum of £959.82 which
was still due to Mr Lalji. So far as the claim for damages for!
was concerned, this was resisted on a number of grounds, including limitation.
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After a reply was served on Mr Lalji’s behalf, the action was listed for trial on
7 April 2003. On 28" February the defendants issued an application for
summary judgment and/or an order striking out certain aspects of the claim.
This application, supported by a witness statement by the defendant’s solicitor,
was listed for hearing on 7" March. No explanation was given of the reason
why the application was made so late. On the other hand no point was taken
on Mr Lalji’s behalf that he had insufficient time to respond to the application.
In recent years both the House of Lords and this court have drawn attention to
the unwisdom in many cases of seeking to bring an action to a summary
conclusion before any disputes on the facts have been resolved at the trial. The
present case seems to me to provide a good example of what may go wrong if
short cuts are taken in an effort to eliminate the cost of a contested hearing.
It was common ground that one issue had to proceed to trial in any event. This
was the claim for damages for wrongful termination of the contract, in so far as
it represented a money claim for three months’ loss of income.
It appears to me that the claimant’s claim for financial loss caused to his
associated business from the summary termination is also fit to proceed to trial.
Although it is not yet pleaded as including the value of the loss of opportunity
of selling the combined business as a going concern to a purchaser who might
have satisfied the Post Office as being a suitable sub-postmaster, as was
suggested in argument, such an amendment might be made, and in any event I
do not consider that it could properly be held that there is no real prospect of a
claim succeeding under this head.
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12.
This claim was pleaded as a claim for general damages arising out of the failure
of the associated business, being a failure attributed to the closure of the sub-
post office. In paragraph 8 of the particulars of claim it was asserted that it
was commonplace for sub-postmasters as a class of men and women to carry
on an ancillary trade (in this case the trade of newsagents, confectioners and
grocers), and to depend on attracting custom for this trade from the people
transacting post office business. This rendered the ancillary trade profitable
enough to afford sub-postmasters sufficient income on which to live, when
taken together with their remuneration as sub-postmaster.
The judge said that the parties when making their contract would not have
regarded the closure of the associated business as a foreseeable consequence of
any failure by the Post Office to give three months’ notice. He added that Mr
Lalji also had no reasonable prospect of successfully proving that the closure
followed from the failure to give notice, rather than the actual period of closure
between the 24" July 1997 and the 30 October 1997 which “the defendants
were lawfully entitled to bring about by reason of the very complex contract
entered into between the parties”.
This matter, in my judgment, raises issues of disputed fact which can only be
resolved at the trial. One could well see how the business might have limped
along during the period of Mr Lalji’s suspension but was then dealt a body
blow by the summary termination. Similarly, it seems to me that the issue as to
what the parties reasonably foresaw might have been the effect of summary
termination when they entered into the contract originally is essentially one to
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17.
be resolved on evidence by the trial judge, and not one to be resolved on no
evidence in a summary manner.
The next issue relates to the claim for remuneration for the months of July,
August, September and October 1997 which the defendants claimed to be
entitled to withhold permanently pursuant to their rights under section 19(5)
and (6) of his contract (see paragraph 5 above). No issue arose as to the
entitlement to withhold remuneration during the period of suspension. The
dispute arose under section 19(6) which purported to give the Post Office at
the end of that period an unfettered discretion to forfeit the withheld
remuneration wholly or in part “after consideration of the whole of the
circumstances of the case” whether the period of suspension ended by
termination of the contract or reinstatement.
One of the matters on which Mr Lalji relied on by way of reply was to contend
that section 3 of the Unfair Contract Terms Act 1977 could be called to his aid
to invalidate section 19(6) in the circumstances of his case. In his judgment the
judge referred, in effect, only to section 3(2)(a) of that Act, and said that since
this sub-section would apply only if there was a breach of contract by the
defendants it was inapplicable in the present case since the forfeiting of
remuneration was not a breach of contract.
On the appeal Mr Davies called in aid section 3(2)(b) of the Act. He said that
this was a contract on the Post Office’s written standard terms of business by
which the Post Office was claiming to be entitled to render no performance at
all in relation to its obligation to remunerate Mr Lalji during each month of his
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suspension. In these circumstances it would be for the Post Office to show at
trial that the contractual term on which it relied passed the “reasonableness”
test in section 11 of the Act, and this would be essentially a matter for the trial
judge to determine. I agree.
Finally, there is the question whether Mr Lalji should be permitted to pursue to
trial his claim for damages for the manner of his dismissal. He contends that
the Post Office dismissed him in a harsh and humiliating way which imputed
dishonesty to him, thereby stigmatising him and making it all but impossible for
him to find another position. The claim under this head includes a claim for
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aggravated damages and also a claim for damages for the! GRO
that the Post Office’s retail network manager was so hostile to him that he
believed that her decision in his case was a foregone conclusion. He also
maintained that this manager had assured his wife that the Post Office would
turn a blind eye to Pension and Allowance books being held against customers’
debts, such as had occurred on two occasions, so long as those books were not
held on the Post Office side of their premises.
Mr Griffith-Jones QC, who appeared for the defendants, observed that it was
now common ground between the parties that Mr Lalji was not employed
under a contract of employment (see Commissioners of Inland Revenue v Post
Office Ltd [2003] IRLR 199). In his particulars of claim he did not rely on
anything resembling the implied duty of mutual trust and confidence, such as
had provided the foundation stone for claims of this kind in the employment
sphere. In any event in that sphere the House of Lords has now held in
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20.
Johnston v Unisys Ltd [2001] UKHL 13; [2003] 1 AC 518 at [46] that this
term was always concerned with preserving the continuing relationship which
should subsist between employer and employee, and that it was not altogether
appropriate for use in connection with the way in which that relationship was
terminated. In any event, he said that this part of Mr Lalji’s claim presented
formidable limitation problems.
In reply Mr Davies said that the limitation issue could not be brushed aside in a
summary way. Even if Mr Lalji had the requisite knowledge more than three
years before the issue of proceedings there was still a claim for the discretion of
the court to be exercised in his favour pursuant to section 33 of the Limitation
Act 1980, and this issue could not be determined summarily. As to the claim
for damages arising out of the manner of the termination, this should not be
dismissed summarily on a pleading point. This was a developing area of the
law in which the House of Lords had shown itself willing to extend the
occasions on which damages of this kind could be claimed for breach of
contract. Even if this was not a contract of employment, it was very close to
being a contract of employment, and the only reason why the House of Lords
had barred a claim of this kind in an employment context was that in its unfair
dismissal legislation Parliament had provided an alternative remedy. Mr Lalji
had no such alternative remedy. In this context he was entitled to call in aid
Lord Hoffmann’s dictum in Johnson at paragraph 50 to the effect that where
there was no relevant legislation in this area he would regard the question
whether judges should develop the law by implying a suitable term into the
contract of employment as finely balanced.
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21.
22.
In my judgment there are simply too many difficulties in Mr Lalji’s path in
respect of this aspect of his claim for us to be able to hold that the judge was
wrong to enter summary judgment for the defendants on this part of his claim.
Even if one puts the limitation problems on one side, there are problems with
the facts, because his claim that he was treated in a humiliating manner,
although supported by a statement of truth, appears on paper extremely thin,
surfaced a considerable time after the events in
question in this action. Difficult issues of foreseeability and causation would
have to be surmounted successfully. There are also very serious problems with
the law, which it is very difficult to see how he could surmount. Although I
appreciate that there is high authority to the effect that where the law is in a
state of development it is wrong to shut a claim off before the facts are
established (see X (Minors) v Bedfordshire County Council [1995] 2 AC 633,
740H-741A), there are just too many difficulties with the facts to warrant the
claim going forward to trial. Compare the approach of Lord Steyn in Johnson v
Unisys Ltd (2001] UKHL 13 at [29]; [2003] 1 AC 518.
For these reasons I would allow this appeal to the extent set out in this
judgment.
Lord Justice Sedley:
23.
24.
I agree with the judgment of Lord Justice Brooke.
So far as concerns the taking of a decision in Mr Lalji’s absence, no legitimate
ground of complaint can arise. Mr Lalji was twice offered the opportunity to
attend and twice failed to do so. It is too late for counsel to tell us now that he
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25.
26.
27.
was too} GRO “to attend. The least that could be expected of someone who
was not wholly incapacitated is that he would have told the Post Office that
this was so. At worst he should have made use of his right of appeal.
But it does not follow that his silence left the Post Office free either to
terminate the contract summarily rather than on the due 3 months’ notice, nor
arbitrarily to forfeit the remuneration which it had meanwhile withheld.
As to the first of these, I see nothing at present in the evidence which justifies
the Post Office's resort to the drastic remedy of summary termination. As to
the second, it seems to me cogently arguable that clause 19.6 of the contract,
which purports to give an unfettered power to forfeit remuneration withheld
during a period of suspension, falls foul of s.3(2)(b) of the Unfair Contract
Terms Act 1977.
The Post Office’s concession that the power must not be exercised capriciously
(I assume in its favour that it will at least be able to pass this test) will not be
enough to meet the requirements of the 1977 Act if s.3 applies. How the
section operates - whether by avoidance of the offending provision or by
reading down - does not have be determined at this stage. It may well have to
be decided, however, at trial.
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