LAW REPORT : BCCI workers cannot claim `stigma' payout

Malik and another v Bank of Credit and Commerce International SA (in liquidation). Court of Appeal (Lord Justice Glidewell, Lord Justice Morritt and Lord Justice Aldous). 9 March 1995.

Former employees of the collapsed Bank of Credit and Commerce International SA were unable to claim compensation for the stigma attaching to them as a result of the fraudulent way some of the bank's business had apparently been conducted, and the adverse effect this had on their attempts to obtain fresh employment, despite their personal innocence of any wrongdoing.

The Court of Appeal unanimously dismissed appeals by Qaiser Mansoor Malik and Raihan Nasir Mahmood and affirmed the decision of Mr Justice Evans- Lombe (Independent, 21 March 1994) striking out their claims for compensation against BCCI as failing to disclose a reasonable cause of action.

Eldred Tabachnik QC and Andrew Stafford (Manches & Co) for the appellants; Patrick Elias QC and Christopher Jeans (Lovell White Durrant) for BCCI.

LORD JUSTICE MORRITT said the facts agreed for the purpose of these proceedings were: (a) the appellants were employees of BCCI, (b) BCCI operated in a corrupt and/or dishonest manner, (c) the appellants were innocent of any involvement in BCCI's corruption or dishonesty, (d) following the collapse of BCCI, its corruption and/or dishonesty became widely known, (e) in consequence the appellants were now at a handicap on the market, being stigmatised by reason of their previous employment by BCCI, and (f) they had suffered loss in consequence.

Mr Mahmood, who joined BCCI in June 1975 and in 1990 became manager of its Brompton Road, London branch, claimed £99,753.35. Mr Malik, who joined BCCI in 1979, and in 1990 became head of deposit accounts at its Leadenhall, London branch, claimed £50,000.

They argued there was to be implied into their respective contracts of employment 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."

The judge formulated an alternative version, that: "the employer will not . . . so conduct his business with his customers that employees . . . will be likely to be . . . put at a disadvantage in the employment market in the event that their employment . . . is terminated." He concluded that such a term could not be implied because it was no part of an employment contract to prepare an employee for service with future employers and the parties could not be assumed to have been agreeable to the inclusion of such a term when making the contract. The appellants contended the judge was wrong and should have dealt with the term as formulated by them.

Three principles were, it seemed, well established. (1) An employer had no obligation to employ or pay the employee for longer than the period of notice for which the contract provided. (2) Damages were not recoverable in contract for the manner, as opposed to the fact, of the breach; the award of exemplary damages being confined in practice to certain claims in tort. (3) Damages were not recoverable in contract for damage to, or loss of, an existing reputation.

The appellants could not and did not complain that their employment with BCCI was terminated in October 1991; they accepted that they had been fully recompensed for any recoverable loss in that regard.

They could not complain for the manner of their dismissal and did not in terms do so. But despite their protestations to the contrary, it seemed they did claim damages for injury to their previously existing reputations.

They suggested such damages were not claimed as such and were justified on general principles as the pecuniary loss flowing from a breach of the implied term.

His Lordship did not accept that analysis. The appellants did not claim damage to goodwill as recognised by law, and the object of the contract was to employ, not to promote or preserve existing reputations or to prepare for future employment. In these circumstances, the damages they claimed were not legally recoverable, for they would be compensated for damage to reputation alone. LORD JUSTICE ALDOUS and LORD JUSTICE GLIDEWELL concurred.

Paul Magrath, Barrister.