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*20 Malik Appellant v Bank of Credit and Commerce International S.A. (In Compulsory Liquidation) Respondents Mahmud Appellant v Same Respondent House of Lords 12 June 1997

[1997] 3 W.L.R. 95
[1998] A.C. 20 Lord Goff of Chieveley , Lord Mackay of Clashfern , Lord Mustill , Lord Nicholls of Birkenhead and Lord Steyn 1997 Feb. 24, 25, 26; June 12
[Consolidated Appeals]
[On Appeal from Mahmud and Another v. Bank of Credit and Commerce International S.A.]
Employment—Contract of employment—Implied term—Employer in liquidation reputed to have acted fraudulently—Redundant employees proving in liquidation for compensation for loss of employment prospects—Whether employer in breach of implied obligation of good faith—Whether stigma damages recoverable under contract The applicants were employees of a bank in respect of which provisional liquidators were appointed in July 1991. Shortly thereafter it became widely known that the regulatory authorities considered that the bank's business had for a number of years been carried on fraudulently. In October 1991 the provisional liquidators terminated the employment of both applicants on grounds of redundancy. Neither applicant was thereafter able to obtain employment in the financial services industry, allegedly because of the stigma attaching to him as a former employee of the bank, notwithstanding his innocence of any wrongdoing. Each submitted a proof of debt in the liquidation claiming substantial sums as compensation for the alleged stigma. Those proofs were rejected by the liquidators, and the applicants appealed to the judge, who held on a preliminary issue, on the basis of a statement of facts agreed for those purposes, that the evidence in support of each claim failed to disclose a reasonable cause of action or a sustainable claim for damages. The Court of Appeal dismissed the applicants' appeals. On appeals by the applicants:Held, allowing the appeals, (1) that there was an implied obligation on an employer that he would not carry on a dishonest or corrupt business, and if it could be shown that it was reasonably foreseeable that in consequence of his corruption there was a serious possibility that an employee's future employment prospects were handicapped, damages were recoverable for any such continuing financial losses sustained; and that it made no difference if the employee only heard of the employer's conduct *21 after leaving the employment (post, pp. 33A-B, 34F, 36B-D, 37B-C, 46D-E, 47H-48B). Woods v. W. M. Car Services (Peterborough) Ltd. [1981] I.C.R. 666, E.A.T. ; Lewis v. Motorworld Garages Ltd. [1986] I.C.R. 157, C.A. and Imperial Group Pension Trust Ltd. v. Imperial Tobacco Ltd. [1991] 1 W.L.R. 589 approved . Addis v. Gramophone Co. Ltd. [1909] A.C. 488, H.L.(E.) not followed . (2) That where a breach of contract gave rise to financial loss which on ordinary principles would be recoverable as damages for breach of contract, such damages did not cease to be recoverable because they might also be recoverable in an action for defamation (post, pp. 33A-B, 40D-E, 41E-F, 52G-53A).

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Marbe v. George Edwardes (Daly's Theatre) Ltd. [1928] 1 K.B. 269, C.A. approved . Herbert Clayton and Jack Waller Ltd. v. Oliver [1930] A.C. 209, H.L.(E.) considered . Withers v. General Theatre Corporation Ltd. [1933] 2 K.B. 536, C.A. overruled in part . Decision of the Court of Appeal [1996] I.C.R. 406 reversed . The following cases are referred to in their Lordships' opinions:

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Addis v. Gramophone Co. Ltd. [1909] A.C. 488, H.L.(E.) Aerial Advertising Co. v. Batchelors Peas Ltd. (Manchester) [1938] 2 All E.R. 788 Anglo-Continental Holidays Ltd. v. Typaldos Lines (London) Ltd. [1967] 2 Lloyd's Rep. 61, C.A. Brandt v. Nixdorf Computer Ltd. [1991] 3 N.Z.L.R. 750 Clayton (Herbert) and Jack Waller Ltd. v. Oliver [1930] A.C. 209, H.L.(E.) Cointat v. Myham & Son [1913] 2 K.B. 220 Foaminol Laboratories Ltd. v. British Artid Plastics Ltd. [1941] 2 All E.R. 393 G.K.N. Centrax Gears Ltd. v. Matbro Ltd. [1976] 2 Lloyd's Rep. 555, C.A. Hadley v. Baxendale (1854) 9 Exch. 341 Imperial Group Pension Trust Ltd. v. Imperial Tobacco Ltd. [1991] 1 W.L.R. 589; [1991]
I.C.R. 524; [1991] 2 All E.R. 597 Lewis v. Motorworld Garages Ltd. [1986] I.C.R. 157, C.A. Lonrho Plc. v. Fayed (No. 5) [1993] 1 W.L.R. 1489; [1994] 1 All E.R. 188, C.A. Marbe v. George Edwardes (Daly's Theatre) Ltd. [1928] 1 K.B. 269, C.A. Maw v. Jones (1890) 25 Q.B.D. 107, D.C. Norton Tool Co. Ltd. v. Tewson [1973] 1 W.L.R. 45; [1972] I.C.R. 501; [1973] 1 All E.R. 183, N.I.R.C. O'Laoire v. Jackel International Ltd. (No. 2) [1991] I.C.R. 718, C.A. Scally v. Southern Health and Social Services Board [1992] 1 A.C. 294; [1991] 3 W.L.R. 778; [1991] I.C.R. 771; [1991] 4 All E.R. 563, H.L.(N.I.) Spring v. Guardian Assurance Plc. [1995] 2 A.C. 296; [1994] 3 W.L.R. 354; [1994]
I.C.R. 596; [1994] 3 All E.R. 129, H.L.(E.) Vivian v. Coca-Cola Export Corporation [1984] 2 N.Z.L.R. 289 Vorvis v. Insurance Corporation of British Columbia (1989) 58 D.L.R. (4th) 193 Whelan v. Waitaki Meats Ltd. [1991] 2 N.Z.L.R. 74 Withers v. General Theatre Corporation Ltd. [1933] 2 K.B. 536, C.A. Woods v. W. M. Car Services (Peterborough) Ltd. [1981] I.C.R. 666, E.A.T. *22

The following additional cases were cited in argument:

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Banque Bruxelles Lambert S.A. v. Eagle Star Insurance Co. Ltd. [1997] A.C. 191;
[1996] 3 W.L.R. 87; [1996] 3 All E.R. 365, H.L.(E.) Beckham v. Drake (1849) 2 H.L.Cas. 579, H.L.(E.) Bliss v. South East Thames Regional Health Authority [1987] I.C.R. 700, C.A. Boston Deep Sea Fishing and Ice Co. v. Ansell (1888) 39 Ch.D. 339, C.A. British Guiana Credit Corporation v. Da Silva [1965] 1 W.L.R. 248, P.C. Dunk v. George Waller & Son Ltd. [1970] 2 Q.B. 163; [1970] 2 W.L.R. 1241; [1970] 2 All E.R. 630, C.A. Emmens v. Elderton (1853) 13 C.B. 495, H.L.(E.) Foley v. Interactive Data Corporation (1988) 254 Cal.Rptr. 211 General Billposting Co. Ltd. v. Atkinson [1909] A.C. 118, H.L.(E.) MacKay v. Dick (1881) 6 App.Cas. 251 Peso Silver Mines Ltd. v. Cropper [1966] S.C.R. 673 Photo Production Ltd. v. Securicor Transport Ltd. [1980] A.C. 827; [1980] 2 W.L.R.

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283; [1980] 1 All E.R. 556, H.L.(E.) Post Office v. Roberts [1980] I.R.L.R. 347, E.A.T. Sinclair v. Positype Corporation of America (1933) 261 N.Y.S. 900 Smith v. Manchester Corporation (1974) 17 K.I.R. 1, C.A. Thorpe v. South Australian National Football League (1974) 10 S.A.S.R. 17 Watts v. Morrow [1991] 1 W.L.R. 1421; [1991] 4 All E.R. 937, C.A. Western Excavating (E.C.C.) Ltd. v. Sharp [1978] Q.B. 761; [1978] 2 W.L.R. 344;
[1978] I.C.R. 221; [1978] 1 All E.R. 713, C.A. Wilson v. United Counties Bank Ltd. [1920] A.C. 102, H.L.(E.)

The following additional cases, although not cited in argument, were referred to in the printed cases:

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Alexander v. Standard Telephone & Cables Ltd. (No. 2) [1991] I.R.L.R. 286 Fosca Services (U.K.) Ltd. v. Birkett [1996] I.R.L.R. 325 Heywood v. Wellers [1976] Q.B. 446; [1976] 2 W.L.R. 101; [1976] 1 All E.R. 300, C.A. Jarvis v. Swans Tours Ltd. [1973] Q.B. 233; [1972] 3 W.L.R. 954; [1973] 1 All E.R. 71, C.A. Knupffer v. London Express Newspaper Ltd. [1944] A.C. 116, H.L.(E.) Lavarack v. Woods of Colchester Ltd. [1967] 1 Q.B. 278; [1966] 3 W.L.R. 706; [1966]
3 All E.R. 683, C.A. Liverpool City Council v. Irwin [1977] A.C. 239; [1976] 2 W.L.R. 562; [1976] 2 All E.R. 39, H.L.(E.) Moorcock, The (1889) 14 P.D. 64, C.A. Shirlaw v. Southern Foundries (1926) Ltd. [1939] 2 K.B. 206; [1939] 2 All E.R. 113, C.A.

Appeal from the Court of Appeal. These were consolidated appeals by leave of the House of Lords (Lord Goff of Chieveley, Lord Mustill and Lord Steyn) dated 16 January 1996 by the applicants, Raihan Nasir Mahmud and Qaiser Mansoor Malik, from the judgment dated 9 March 1995 of the Court of Appeal (Glidewell, Morritt and Aldous L.JJ.) dismissing their appeals from the judgment dated 16 February 1994 of Evans-Lombe J. By that judgment on a preliminary issue Evans-Lombe J. upheld decisions dated 21 May 1993 of the provisional liquidators of the defendants, Bank of Credit and Commerce International S.A. ('B.C.C.I.'), rejecting proofs of debt by the applicants claiming damages for breach of contract by way of *23 compensation for the alleged stigma attaching to them as former employees of B.C.C.I. The facts are stated in their Lordships' opinions. Lord Mackay of Clashfern L.C. left office on 2 May 1997. Eldred Tabachnik Q.C. and Andrew Stafford for the applicants. It is common ground that into each of the contracts of employment there is implied a term that the employer will not, without reasonable and proper cause, conduct itself in a manner calculated or likely to destroy or seriously damage the relationship of confidence and trust between employer and employee: see Woods v. W. M. Car Services (Peterborough) Ltd. [1981]
I.C.R. 666 , 670; Lewis v. Motorworld Garages Ltd. [1986] I.C.R. 157 and Imperial Group Pension Trust Ltd. v. Imperial Tobacco Ltd. [1991] I.C.R. 524 , 533C-E. A breach of the term may arise (1) where the employer commits an act which is directed at the particular employee, such as calculated victimisation; or (2) where, without good cause, the employer engages in conduct which, viewed objectively, is likely seriously to damage the relationship of employer and employee. The present case involves conduct of the second type. The implied term operates to inhibit the unfair exploitation by the employer of his employee. For the importance of this term, see the dicta of Broussard J. and Kaufman J. in Foley v. Interactive Data Corporation (1988) 254 Cal.Rptr. 211, 246, 253.

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The Court of Appeal held, obiter, that it was a necessary ingredient of any breach of this term that the employee was aware of the employer's misconduct while still in the employment. This is incorrect: see Boston Deep Sea Fishing and Ice Co. v. Ansell (1888) 39 Ch.D. 339 . The introduction of knowledge as a necessary ingredient of a cause of action would have the effect of rewriting the law on limitation for breach of contract. A cause of action in contract accrues upon breach. On the Court of Appeal's analysis, this could be at any time during the employee's continued employment. Thus, by a side wind, an amendment is thereby effected to section 14A of the Limitation Act 1980 (as amended by the Latent Damage Act 1986 ), which is confined to claims in tort. By operating the business in a corrupt and dishonest manner B.C.C.I. acted in breach of the implied obligation of good faith. Where an employer has acted in breach of that obligation the commonsense reaction is that he has committed a repudiatory breach of the obligation, and that the employee has accepted that breach as discharging him from further performance. The applicants only seek to recover damages for the pecuniary losses which flow from an anterior breach of the implied term of good faith. These losses are recoverable because they are a natural and probable consequence of the breach. If the rule in Addis v. Gramophone Co. Ltd. [1909] A.C. 488 does prevent the applicants from seeking to recover such damages, then the House of Lords should depart from that decision. It is inherent in the Court of Appeal's decision that no goodwill attaches to the experience and skill of an employee. This is contrary to the experience of employers, who value skilled and experienced employees and *24 exact covenants in restraint of trade from employees in order to prevent them from exploiting the goodwill which adheres to them. The skill and experience of an employee have a value just as much as the customer connection of a business and if his capacity to exploit his skill and experience is impaired by reason of his employer's breach of contract, the pecuniary losses which flow from that breach are equally recoverable. It is unnecessary to establish that B.C.C.I.'s breach was repudiatory in its nature. Nevertheless, when considering an employer's conduct directed towards third parties it may be useful to have repudiation in mind. This is because if the employee is entitled to treat a breach as repudiatory in its nature, he will be able to leave his job free from the shackles of a covenant in restraint of trade. If the employee could only resign in response to his employer's conduct, he would be bound by such covenants, on the principle of General Bill Posting Co. Ltd. v. Atkinson [1909] A.C. 118 . The implied term of mutual trust and confidence is the appropriate term of the contract to cover not only conduct directed towards an employee but also conduct directed towards third parties. It is a term which is flexible in its nature and which is intended to cover the multitude of circumstances in which the employer's right to manage has to be balanced with the employee's right not to be unfairly exploited by his employer. Strictly speaking it is unnecessary to formulate a separate implied term to take account of conduct directed towards third parties. This is because if conduct directed towards third parties can be a breach of the implied term of mutual trust and confidence, it follows that the formulation of such a separate implied term is only really an aspect of the wider term. This was how the case was argued at first instance. Nevertheless, since the implied term of mutual trust and confidence can be breached both by conduct directed towards the employee and by conduct which is directed towards third parties, it may be helpful to express it in a form which focuses exclusively upon the particular element which is present in the present case. On this basis, the implied term of mutual trust and confidence can be expressed as follows: 'The employer will not, without reasonable and proper cause, so conduct itself in its dealings with third parties as to destroy or seriously damage the relationship of trust and confidence between employer and employee.' The purpose of this implied term is to limit the employee's obligation to give loyal service to his employer. He cannot be expected to give such service when the employer is improperly conducting itself in a manner which evinces an intention on the part of the employer not to observe the limits of the bargain. Improper conduct which will seriously harm the employee's capacity to earn his living once the employment has come to an

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end is an example of such conduct. This is because both parties have contracted on the footing that the employment may come to an end upon the giving of a few weeks' notice. The terms of the contract expressly contemplate the return of the employee to the labour market, and it is not part of the bargain that the employer may, through improper conduct, impair the employee in obtaining re-employment. The employee is entitled to be returned to the labour market fit for re-employment, 'fair wear and tear accepted.'
[Reference was made to Banque Bruxelles Lambert S.A. v. Eagle Star Insurance Co. Ltd.
[1997] A.C. 191 , 212E-F.] To conclude that the purpose of the implied term is to protect the employee from damage directly caused by the employer's misconduct gives effect to the limit of the employee's obligation to give service. In more general terms, it may be said that the purposes of a contractual term are (a) to identify the promisor's primary obligation, and (b) to secure the promisee's performance by the promisor's agreement to respect the limits of the bargain and to keep the promisee free from that damage which is the natural and probable consequence of the promisor's non-performance. In this respect, the promisor's acceptance of the secondary obligation to pay damages for breach is part of the consideration for the contract. As was stated by Bridge L.J. in G.K.N Centrax Gears Ltd. v. Matbro Ltd. [1976] 2 Lloyd's Rep. 555 it is to be inferred that a contracting party has agreed to bear the risk of damage which is the natural and probable consquence of its breach. The secondary obligation to pay damages for breach of a primary obligation itself arises by implication of law: see Photo Production Ltd. v. Securicor Transport Ltd. [1980] A.C. 827 , 848-849. It is possible to spell out the primary obligation in conjunction with the secondary obligation as follows: 'The employer will not, without reasonable and proper cause, so conduct itself in its dealings with third parties as to destroy or seriously damage the relationship of trust and confidence between employer and employee. In the event of default by the employer, it will pay those damages which are the natural and probable consequences of that default.' If being placed at a handicap on the labour market is a natural and probable consequence of B.C.C.I's breach, the implied obligations of the employer come very close indeed to the amended implied term which can be derived from B.C.C.I.'s printed case. It is, however, slightly too wide. It should be formulated as follows: 'The employer will not, without reasonable and proper cause, so conduct itself in its dealings with third parties as to destroy or seriously damage the relationship of trust and confidence between employer and employee, and thereby affect the employee's future employment prospects.' If it is incorrect that the implied term of mutual trust and confidence is the appropriate term, then there is an implied term in the contract of employment in the terms which have just been stated. As to Addis v. Gramophone Co. Ltd. [1909] A.C. 488 , the rule in Addis is that an employee dismissed in breach of contract may not recover compensation (a) for injury to his feelings, (b) for the manner of his dismissal, or (c) for the loss he may sustain from the fact that his having been dismissed of itself makes it more difficult for him to obtain fresh employment: see per Lord Loreburn L.C. at p. 491. The rule is based upon a number of separate principles. (a) In an action framed in contract, the quantum of damages may not include aggravated or exemplary damages. (b) An employee is entitled to be put in the position he would have been in had the contract been properly performed. (c) An employer is entitled to perform his obligations in a manner which is least onerous to him. (d) The damages recoverable by an employee must be damages which were in fact caused by the breach.
*26 Thus, since an employer may not be forced to continue to employ his employee (save in certain exceptional circumstances), it is always open to the employer to terminate that relationship by giving the notice required by the contract of employment. A summary dismissal may be carried out harshly and may occasion great distress, but the harshness and the distress do not add anything to the value of the employee's claim for breach of

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the contractual term as to notice. Nor does a handicap on the labour market which results from 'the fact of the dismissal itself' add to this claim. Since the employer was entitled to fulfil his contract in the way least onerous to him, he could have elected to terminate by giving due notice. In this event, the employee would have been in the same position. Thus it could not be said to be damage flowing from the breach. On Lord Loreburn L.C.'s hypothesis, if Mr. Addis were to be put in the position he would have been in had the contract been properly performed (i.e. dismissed with notice), he would still be thrown onto the labour market and would still encounter difficulty in obtaining fresh employment. The dictum of Lord Loreburn L.C., at p. 490, that it signified nothing in that case whether the claim was to be treated as for wrongful dismissal or not, is not authority for the proposition that every repudiatory breach of a contract of employment gives rise to the same damages as for dismissal without notice. To do so would be to treat every breach as a failure to give contractual notice, and would produce startling results. The law which lay behind the rule in Addis v. Gramophone Co. Ltd. and which was regarded by Lord Loreburn L.C., at p. 491, as being 'too inveterate to be now altered' is to be found in the line of cases including the decisions in Beckham v. Drake (1849) 2 H.L.Cas. 579 and Emmens v. Elderton (1853) 13 C.B. 495 . Neither of these cases supports the proposition that pecuniary losses which are a natural and probable consequence of a breach of contract of employment are irrecoverable. Beckham v. Drake does, however, exclude the possibility of recovering general damages for 'personal inconvenience and personal suffering' following the dismissal of the plaintiff. The content and tenor of the other speeches delivered in Addis are consistent with the following contentions. (a) General damages for intangible injuries, such as distress, or for injury arising from the manner of the dismissal, are not recoverable: per Lord James, at p. 492, per Lord Atkinson, at p. 493, per Lord Gorell, at p. 501, per Lord Shaw, at p. 504. Damages for breach of a contract of employment are to be assessed by reference to ordinary principles of remoteness and causation: per Lord Atkinson, at pp. 494-495, per Lord Gorell, at p. 501. In two categories of case the rule in Addis v. Gramophone Co. Ltd. has not been held to exclude the recovery of damages. (a) There has been a number of cases in which recovery of damages has been permitted where the object of the contract was to confer upon the employee a particular benefit: see Herbert Clayton and Jack Waller Ltd. v. Oliver
[1930] A.C. 209 and Wilson v. United Counties Bank [1920] A.C. 102 . (b) The courts have also recognised the recoverability of pecuniary losses resulting from damage to reputation: see Aerial Advertising Co. v. Batchelors Peas Ltd. (Manchester) [1938] 2 All E.R. 788 ; Foaminol Laboratories Ltd. v. British Artid Plastics Ltd. [1941] 2 All E.R. 393 ; Anglo-Continental Holidays Ltd. v. Typaldos Lines (London) Ltd. [1967] 2 Lloyd's Rep. 61 and G.K.N. Centrax Gears Ltd. v. Matbro Ltd. [1976] 2 Lloyd's Rep. 555 . The cases subsequent to Addis v. Gramophone Co. Ltd. [1909] A.C. 488 in which a remedy has been denied to the employee may be rationalised as examples of claims which offended against one of the limbs of the rule in Addis. Thus, there are (a) claims for distress and injury to feelings resulting from the employer's wrongful dismissal ( Bliss v. South East Thames Regional Health Authority [1987] I.C.R. 700 ; British Guiana Credit Corporation v. Da Silva [1965] 1 W.L.R. 248 ; Vivian v. Coca-Cola Export Corporation
[1984] 2 N.Z.L.R. 289 and O'Laoire v. Jackel International Ltd. (No. 2) [1991] I.C.R. 718 ) and (b) claims for damages to reputation said to result from the manner of the dismissal ( O'Laoire v. Jackel International Ltd. (No. 2) [1991] I.C.R. 718 ) and (b) claims for damages to reputation said to result from the manner of the dismissal O'Laoire v. Jackel International Ltd. (No. 2) [1991] I.C.R. 718 , 724B and Vivian v. Coca-Cola Export Corporation [1984] 2 N.Z.L.R. 289 ). In Withers v. General Theatre Corporation Ltd. [1933] 2 K.B. 536 the court interpreted Herbert Clayton and Jack Waller Ltd. v. Oliver [1930] A.C. 209 in a restrictive way which was unwarranted. The court concluded that the earlier case had decided it was beyond the competence of the jury to take into account damages to an existing reputation when considering its award: see per Scrutton L.J., at p. 547. But Herbert Clayton and Jack Waller Ltd. v. Oliver [1930] A.C. 209 did not decide that damages to an existing reputation were irrecoverable. It decided that the damage caused by the loss of publicity

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was recoverable, and drew no distinction between different types of damage caused by the loss of publicity. Withers v. General Theatre Corporation [1933] 2 K.B. 536 is inconsistent with the earlier decision of the Court of Appeal in Marbe v. George Edwardes (Daly's Theatre) Ltd. [1928] 1 K.B. 269 , where it was held that the plaintiff was entitled to damages for injury to her reputation: see per Bankes L.J., at p. 281, and per Atkin L.J., at p. 288. In addition to those types of case in which the rule in Addis has now been applied, there are a number of situations in which the law grants a compensatory remedy. Thus, in cases of unfair dismissal, the industrial tribunal has the power to make a compensatory award in appropriate cases reflecting the employee's handicap on the labour market as a result of the manner of his dismissal: see Norton Tool Co. Ltd. v. Tewson [1973] 1 W.L.R. 45 , 50, per Sir John Donaldson. For recent cases in tort where the successful plaintiff employee could equally well have sued in contract for being placed at a handicap on the labour market by his employer: see Smith v. Manchester Corporation (1974) 17 K.I.R. 1 and Spring v. Guardian Assurance Plc. [1995] 2 A.C. 296 , 339-340, 353-354. If, as B.C.C.I. contends, the rule in Addis v. Gramophone Co. Ltd. [1909] A.C. 488 excludes claims for pecuniary loss resulting from a breach of contract, then it would be anomalous and would produce results which were arbitrary and contrary to principle, for (a) it is contrary to principle that a person who has been the victim of a breach of contract which directly causes pecuniary loss should be left without an effective remedy: 'ubi ius ibi remedium;' (b) it is illogical that pecuniary losses which are the result of damage to reputation should be recoverable by a company, firm or sole trader and yet irrecoverable by an employee; (c) it is anomalous that damages for his handicap in the labour market should be recoverable by an employee who suffered personal injury and yet be irrecoverable by an employee who is at an equal handicap by reason of a breach of contract which causes only financial injury; (d) it is anomalous that loss of a similar type should be *28 recoverable within proceedings for unfair dismissal and yet irrecoverable in claims for breach of contract of employment; and (e) it is illogical that an ex-employee whose reputation is damaged by a negligently prepared reference should be able to recover, both in contract and tort, damages for the losses he sustains, whilst an employee who is placed in an identical position on the labour market as a direct result of his employer's breach of contract should not. It follows that there is no reason founded in principle why an employee whose capacity to obtain remunerative employment and give valuable service would be damaged by his employer's breach of contract should be denied the right to recover damages reflecting the pecuniary losses which he has sustained by reason of that breach. There are powerful considerations of policy which lead to the conclusion that, subject to proof, the applicants should be permitted to recover the damages which they claim. (a) To find in favour of the applicants would not increase the scope of the primary obligations imposed upon B.C.C.I., since it has conceded the existence of the implied term of good faith. Allowing the appeal only affects the secondary obligation imposed by law upon the contract-breaker by requiring it to compensate the victim for the direct pecuniary consequences of that breach. (b) The practical significance of the implied term of good faith as a means of inhibiting unfair exploitation of an employee would be reinforced by deciding that an employer is obliged to pay damages for the pecuniary losses resulting directly from his contractual misconduct. Patrick Elias Q.C. and Christopher Jeans for B.C.C.I. The applicants seek to rely on two alleged terms: (i) the duty on the employer not to conduct his business in a manner calculated or likely to destroy or seriously damage the relationship of trust and confidence ('the wide term'), and (ii) the duty not to conduct his business in a wrongful way which may affect the employee's future employment prospects ('the narrow term'). As to the narrow term, the only issue is whether the term exists. If it does, on the assumed facts the loss would be recoverable, under one of the exceptions to Addis v. Gramophone Co. Ltd. [1909] A.C. 488 , as constituting the very damage which the term was designed to prevent. The issue, therefore, is simply whether this term can properly be implied. The answer is in the negative for the following reasons. (i) It is not generally in the employer's interest

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