[2001] IRLR 448 R v Chief Constable of Merseyside Police ex parte Bennion: Henry LJ

58 Fourth, he has a wide discretion to remit when (if either

before or during a hearing) he considers that remission to COX (claimant/respondent) v.
another chief officer is ‘appropriate’ (reg. 14(7)). SUN ALLIANCE LIFE LTD
59 The first and third categories show that he is not in the
same position as a judge. Nor is he in the position of a pri-
(defendants/appellants)

vate law employer: the framework of his duties and [2001] EWCA Civ 649
responsibilities provide a public law framework, reflecting
the statutory basis of his responsibility for the conduct of 100 Contracts of employment
the men and women under his control. Here he was prop- 133 Terms of employment – duty to take reasonable
erly directed as to the law, and his decision to sit was both care
transparent and scrupulous. 150.3 Employment-related torts – negligent
misstatement
173 Termination – resignation
179 Breach of contract
199.6 Compromise agreement

The facts:
Mr Cox was employed by Sun Alliance Life for some 17 years. In
April 1989, he was promoted to the position of branch manager
at Leeds, in charge of an office which covered the whole of York-
shire. However, the new appointment did not go well and within
six months, a serious rift had developed between Mr Cox and the
other members of staff at the Leeds office. As a result, he was sus-
pended on full pay pending an investigation.
Matters were proceeding towards a settlement, under which Mr
Cox was to receive a lump sum of £25,000 in return for his resig-
nation, when the employers received information from one of their
tied agents to the effect that Mr Cox had received improper pay-
ments. Mr Cox was informed of the gist of the allegations but they
were never fully investigated or discussed with him in detail.
There was, however, a special audit investigation of Mr Cox’s files
which revealed no evidence of fraudulent activity. At no time was
he accused of dishonesty, nor did the employers ever reach the
point of deciding to dismiss him on the ground of those allegations.
Eventually, Mr Cox tendered his resignation on terms which
were recorded on an ACAS COT3 form and which included a tax-
free payment of £15,000 by way of compensation and an under-
taking by the employers to provide him with an agreed reference.
The essence of the agreed reference was that a question as to the
reason for the termination of Mr Cox’s employment would be
answered by saying that he had resigned, and that any request
for “your impression of the applicant as an employee together
with any additional information which you feel may be helpful to
us”, would be answered in accordance with an agreed resume of
his career or within the spirit of that agreed resume. The resume
was favourable, though bland, and made no reference to the dis-
pute which led to Mr Cox’s negotiated departure.
Mr Cox moved almost immediately into new employment as a
branch manager with Hambro Guardian Consultancy. This
employment terminated, however, after Sun Alliance’s personnel
services manager provided a reference which suggested that Mr
Cox had been suspended pending investigation into allegations of
dishonesty and that he would have been dismissed but was
allowed to resign. A reference provided to another firm with
whom Mr Cox gained employment also suggested that his hon-
esty was in issue.
Mr Cox commenced proceedings against Sun Alliance claiming
that they had acted negligently or in breach of the termination
agreement when providing subsequent employers with references.
Mr Duncan Smith, sitting as a recorder at the Leeds County
Court, held that there was no breach of contract but that Sun
Alliance were liable in negligence. He also held that that negli-
gence had caused Mr Cox’s subsequent employment difficulties.
The employers appealed against that decision.
The Court of Appeal (The President [Dame Elizabeth
Butler-Sloss], Lord Justice Mummery, Lord Justice Rix) on
9 May 2001 dismissed the appeal.

The Court of Appeal held:

133, 150.3
The County Court judge had not erred in holding
that the employers were negligent in providing a
reference in respect of the claimant to subsequent
employers which relied upon allegations of dis-
honest conduct which they had not properly
Cox v Sun Alliance Life Ltd: Rix LJ [2001] IRLR 449

investigated. employers with references. Mr Duncan Smith, sitting as a

Discharge of the duty of care to provide an accu- recorder at the Leeds County Court, held that there was
rate and fair reference will usually involve making no breach of contract, but that SAL were liable in negli-
reasonable inquiry into the factual basis of the state- gence. He also held that that negligence caused Mr Cox’s
subsequent employment difficulties, subject to issues of
ments in the reference. A similar approach to that
quantum. SAL now appeal against that judgment, and Mr
set out in British Home Stores Ltd v Burchell in rela- Cox cross-appeals to submit that SAL were in breach of
tion to dismissal on grounds of misconduct is appro- contract as well.
priate. In order to take reasonable care to give a fair
and accurate reference, an employer should confine
unfavourable statements about the employee to
3 The giving of such references is a matter of great concern
to all parties in such a situation. It is of course gravely
those matters into which they had made reasonable important to the employee. Without a decent reference, he
investigation and had reasonable grounds for believ- may find it difficult to obtain further employment, at any
ing to be true. Although, in order to discharge the rate in the sort of occupation which he had previously
duty of care, an employer is not obliged to carry on enjoyed. Above all, if the reference impugns his honesty,
he is likely to find his career destroyed. This is particu-
with an inquiry into an employee’s conduct after the
larly so in the financial services industry, in which Mr Cox
employee has resigned, if an investigation is discon- had spent his life. There Lautro rules (now the PIA)
tinued, unfavourable comments should be confined require the taking (and giving) of proper references and
to matters which had been investigated before the the need for a member to satisfy itself that its employees
resignation. and representatives are fit and proper persons. For just
In the present case, the employers had failed to these reasons, the question of references is of hardly less
take reasonable care to be either accurate or fair in moment to the employers involved. The new employer is
providing a reference which suggested that they had concerned for his obligations to Lautro and, of course, for
a reasonable basis, following upon a reasonable his own business and its reputation. The old employer,
investigation, for dismissing the claimant on the from whom the reference is sought, is also concerned for
his obligations to Lautro, but he has the added difficulty of
ground of dishonesty amounting to corruption when,
doing justice both to the former employee and to the truth
in truth, the charges of dishonesty had never so of the circumstances in which that employee had left. That
much as been put to the claimant, never been made may put the old employer in a difficult situation.
the subject of proper investigation or formal disci-
plinary proceedings and were shelved pending nego-
tiations towards a settlement which provided the
4 Nevertheless, it is clear, if relatively recent, law that an
employer owes to his former employee a duty of care in the
claimant with an agreed reference and substantial giving of a reference: see Spring v Guardian Assurance plc
tax-free payment as compensation for his departure. [1994] IRLR 460. I will consider the nature and extent of
that duty below. For the present it will suffice to cite what
Obiter dicta (per Mummery LJ): Lord Lowry said in Spring at 470:
173, 199.6 ‘The defendants’ second argument (which, in order that
it may prevail, must be made to stand independently on
Where the terms of an agreed resignation or of the
its own feet) is that, even if one concedes foreseeability
compromise of an unfair dismissal claim make pro- and proximity and even if it would otherwise be just and
vision for the supply of a reference, the parties reasonable for the plaintiff to recover under the head of
should ensure as far as possible that the exact word- negligence, public policy dictates that the person who
ing of a fair and accurate reference is fully dis- has been the subject of a negligent misstatement shall
cussed, clearly agreed and carefully recorded in not recover. The argument is grounded on the proposi-
writing on the COT3 at the same time as other sev- tion that the maker of the misstatement, provided he
erance terms. has acted in good faith, must, even if he has been negli-
gent, be free to express his views in the kind of situa-
Cases referred to: tion (including the giving of any reference) which is con-
Bartholomew v London Borough of Hackney [1999] IRLR 246 templated by the doctrine of qualified privilege which is
CA part of the law of defamation.
British Home Stores Ltd v Burchell [1978] IRLR 379 EAT This argument falls to be considered on the assump-
Coote v Granada Hospitality Ltd (No.2) [1999] IRLR 452 EAT tion that, but for the overriding effect of public policy, a
Kidd v AXA Equity & Law Life Assurance Society plc [2000] plaintiff who is in the necessary proximate relation to a
IRLR 301 HC defendant will be entitled to succeed in negligence if he
Spring v Guardian Assurance plc [1994] IRLR 460 HL proves his case. To assess the validity of the argument
Appearances: entails not the resolution of a point of law but a balanc-
For the Claimant/Respondent: ing of moral and practical arguments. This exercise
WITOLD PAWLAK, instructed by David Yablon Minton & Ellis could no doubt produce different answers but, for my
For the Defendants/Appellants: own part, I come down decisively on the side of the
DAVID GRIFFITH-JONES QC, instructed by Lawfords plaintiff.
On the one hand looms the probability, often amount-
ing to a certainty, of damage to the individual, which in
some cases will be serious and may indeed be irrepara-
1 LORD JUSTICE RIX: With effect from 12 March 1990 Mr
(John) Michael Cox, the claimant and in this court the
ble. The entire future prosperity and happiness of some-
one who is the subject of a damaging reference which is
respondent, resigned his employment with Sun Alliance given carelessly but in perfectly good faith may be irre-
Life Ltd (‘SAL’), the defendants and in this court the appel- trievably blighted. Against this prospect is set the pos-
lants, after a successful 17-year career with them had sibility that some referees will be deterred from giving
ended in dispute. He was at that time a branch manager. frank references or indeed any references. Placing full
The dispute was settled by an agreement on ACAS’s COT3 reliance here on the penetrating observations of my
form. The settlement gave Mr Cox a tax-free sum of noble and learned friend, Lord Woolf, I am inclined to
£15,000 by way of compensation and a further sum of view this possibility as a spectre conjured up by the
nearly £6,000 in lieu of notice. It also incorporated an defendants to frighten your Lordships into submission.
agreed reference. I also believe that the courts in general and your Lord-
ships’ House in particular ought to think very carefully
2 The issue on this appeal is whether SAL were in breach of
that agreement, or in breach of a duty of care owed to Mr
before resorting to public policy considerations which
will defeat a claim that ex hypothesi is a perfectly good
Cox, when they later provided Mr Cox’s subsequent cause of action. It has been said that the public policy
[2001] IRLR 450 Cox v Sun Alliance Life Ltd: Rix LJ

should be invoked only in clear cases in which the 19 March 1991, to a question as to SAL’s opinion of Mr
potential harm to the public is incontestable, that Cox’s honesty, behaviour and reliability was that ‘Mr Cox
whether the anticipated harm to the public will be likely resigned at a time when his conduct was being investi-
to occur must be determined on tangible grounds gated’. On 27 March 1991 Windsor Life confirmed Mr
instead of on mere generalities and that the burden of Cox’s appointment ‘subject to receiving satisfactory refer-
proof lies on those who assert that the court should not ences’.
enforce a liability which prima facie exists. Even if one
should put the matter in a more neutral way, I would
say that public policy ought not to be invoked if the
14 Mr Cox’s subsequent history at Windsor Life is a little
obscure, but matters appear to be as follows. A year later,
arguments are evenly balanced: in such a situation the in March 1992 the whole of Windsor Life’s sales force,
ordinary rule of law, once established, should prevail.’ including Mr Cox, had to be suspended at the request of
Lautro, which was investigating whether the company had
5 The essence of the agreed reference in this case was that a
question as to the reason for the termination of Mr Cox’s
fulfilled its Lautro obligations in connection with the
obtaining of proper references for its employees and rep-
employment would be answered by saying that ‘Mr Cox resentatives. As a result, Windsor Life had to obtain fresh
resigned’; and that any request for ‘your impression of the references and wrote to Mr Cosgrave at Hambro
applicant as an employee together with any additional Guardian. On 16 March 1992 Mr Cosgrave replied, on
information which you feel may be helpful to us’ would be Windsor Life’s form, as follows. Having answered ‘Yes’ to
answered in accordance with an agreed resume of his the question ‘Is there any reason why you would not re-
career or with the spirit of that agreed resume. The employ?’, Mr Cosgrave gave details for that answer as fol-
resume was favourable if somewhat bland, and made no lows:
reference to the dispute which led to Mr Cox’s negotiated ‘At the time there was a lack of clarity regarding his pre-
departure. vious employers and reasons for Mr Cox’s resignation –
this was most unfortunate for all concerned.’
6 Mr Cox thereafter moved almost directly into new employ-
ment, again as a branch manager, with Hambro Guardian
Consultancy Ltd (‘Hambro Guardian’), at that time a
15 In answer to a further question as to Mr Cox’s reliability,
behaviour and health, Mr Cosgrave wrote:
start-up company, but part of a larger group. ‘Excellent – very committed honest and hard-working,
Mr Cox will not let you down. Although somewhat indi-
7 On 30 May 1990, the compliance department of Hambro
Guardian wrote to SAL with a request for a reference for
vidualistic he is a good employee who will always do his
best.’
Mr Cox. That request was referred to Mr Malcolm Jones,
at that time the personnel services manager at SAL, sec-
ond only in his department to SAL’s personnel director. Mr
16 Windsor Life also got in touch with Mr Jones at SAL.
There was a telephone conversation on 6 April 1992. It is
Jones subsequently became personnel director. Mr Jones not clear what was said. However, as a result of that con-
had been directly involved, as will appear below, in the versation, Windsor Life wrote the same day to Mr Jones
events leading to Mr Cox’s departure from SAL. asking him for further details concerning the reasons for
Mr Cox’s resignation from SAL. They asked as to the exact
8 On 2 July 1990, Mr Jones replied to Hambro Guardian,
not to its compliance department, but directly to its senior
nature of the ‘alleged misconduct’, and whether it was true
that the allegations were unproven and that there was an
executive, Mr Gunn. Mr Jones’s letter read as follows: agreement for compensation to be paid and for a ‘guaran-
‘I have received the attached reference request from teed reference’. It also asked whether SAL had since
your compliance department. breached this agreement.
As the reference is not entirely straightforward I felt
that it was best to respond via yourself.
If you wish to contact me please telephone me on the
17 The terms of that letter may well reflect not only the tele-
phone conversation with Mr Jones, but also conversations
number quoted above.’ with Mr Cox himself. Following his enforced departure
from Hambro Guardian, Mr Cox suspected that SAL had
9 Almost immediately thereafter Hambro Guardian picked
up that invitation to speak to Mr Jones. There was first a
not kept to the terms of their agreed reference. Back in
March 1991, he had asked that Windsor Life’s request for
telephone conversation between Mr Jones and Ms Liz a reference from SAL should be directed to the union rep-
Wytchard. That was followed on 5 July 1990 by a further resentative at SASU (the Sun Alliance Staff Union) who
telephone conversation between Mr Jones and Mr Brian had assisted him in his dispute with SAL and had negoti-
Cosgrave, who had been the person concerned with Mr ated the settlement agreement and agreed reference. That
Cox’s appointment at Hambro Guardian. It is what was was a Mr Kenneth McAleer. So it was that in March 1991
said by Mr Jones during those telephone conversations Mr McAleer sent to Windsor Life a letter headed ‘To whom
that is at the heart of Mr Cox’s claim and the present it may concern’ regarding Mr Cox. It read:
appeal. ‘I represented Mr Cox during the period of his suspen-
sion and I am prepared to provide information on this
10 Mr Cox complains that during those telephone conversa-
tions Mr Jones said things that were inaccurate, unfair
matter.
I would, however, confirm that after prolonged inves-
and misleading, and highly damaging to him, and that tigation no disciplinary action was taken. Further, no
that led directly to his departure from Hambro Guardian. Lautro related offences were involved.
Indeed Mr Cox was not the subject of a disciplinary
11 There is in fact no dispute that as a result of what Hambro
Guardian then learned from Mr Jones, Mr Cox was
warning at any time during his 17 successful years with
Sun Alliance.’
required to leave. He was given the opportunity of resign-
ing, which he did on 24 July 1990. 18 Mr Jones was also on notice that Mr Cox suspected him of
breaching the agreed reference because on 3 December
12 Between August 1990 and January 1991, Mr Cox worked
either for or as a partner or prospective partner of a firm,
1991 Mr Cox’s solicitors had written to SAL, stating Mr
Cox’s suspicion, and requesting copies of the SAL refer-
Foster Cox and Associates, but that came to nothing as the ences given to Hambro Guardian and Windsor Life. That
firm was soon dissolved. letter was passed to Mr Jones, who on 11 December 1991
had replied, refusing to supply any copies of references as
13 In February 1991 Mr Cox obtained a position with Wind-
sor Life Assurance Company Ltd (‘Windsor Life’) as a self-
a matter of principle, but also giving the categorical
assurance that any references supplied were in accor-
employed senior sales manager. In March 1991 Windsor dance with the agreement made. The matter was pressed
Life sought a reference from SAL. The request was again by Mr Cox’s solicitors in further correspondence, but with-
referred to Mr Jones. Mr Jones’s written response dated out success.
Cox v Sun Alliance Life Ltd: Rix LJ [2001] IRLR 451

19 No doubt bearing the beginnings of this correspondence in

wholehearted agreement with Mr Pawlak’s suggestions
during cross-examination that he was a stranger to the
mind, Mr Jones’s reply to Windsor Life’s letter dated 6 truth. The most obvious example of this was his refusal
April 1992 was suitably cautious. He said: to acknowledge that he was responsible for the noted
‘It is true that a standard reference was agreed with telephone conversations with Brian Cosgrave and Liz
ACAS and a copy has been sent to your offices previ- Wytchard. The evidence satisfied me to the extent that
ously. Because of this agreement with ACAS, I would I was sure that he was the other party to both conver-
not wish to add any further comment as this would sations.’
infringe the agreement … Sun Alliance certainly has
not breached this agreement at any time …’ 26 The circumstances of Mr Cox’s departure from SAL

20 By 28 April 1992, Windsor Life wrote to Mr Cox to inform

In April 1989 Mr Cox was promoted to be SAL’s branch
manager at Leeds, in charge of an office which covered the
him that their enquiries had been concluded satisfactorily whole of Yorkshire. He had previously, since 1985, been
and his suspension had been lifted. a local branch manager for West Yorkshire. His new

21 Nevertheless, Mr Cox complains that, as a result of the

appointment did not go well, however, and by the autumn
of 1989 his staff at Leeds had mutinied against him. On
‘black mark’ on his file caused by SAL, suspension on this 14 November 1989, during a period of absence through
occasion lasted somewhat longer in his case than in the illness, he was suspended on full pay and told to stay away
case of his colleagues, and, more importantly, that the from the Leeds office. At the time of that suspension
employment which he obtained from Windsor Life in no there was no suggestion whatsoever of any financial
way reflected the more senior status which his career and impropriety or dishonesty. As Mr Jones wrote to him on
experience to date would ordinarily have entitled him to. 16 November:
For the same reason, promotion eluded him. He gave evi- ‘In particular, as you are aware, a number of members of
dence at the trial below that the stress placed on him of staff claim that a serious rift has developed between you
attempting, by hard work and from a relatively junior and them as a direct result of your personal manage-
position, to maintain his family’s well-being led to a ner- ment style.
vous breakdown and ultimately to the inability to work. I hope this is of assistance in clarifying the reason for
The recorder concluded his judgment below with these your suspension.’
words:
‘I am quite satisfied that, but for Mr Jones acting as he
did by communicating with Mr Cosgrave and with Liz
27 On 27 November there was a meeting at which Mr Cox
was present together with Mr McAleer, and SAL were rep-
Wytchard, Mr Cox would have continued to pursue his resented by Mr Weatherall and Mr Jones. An aide mem-
impressive career within the insurance trade for as long oire prepared by Mr Weatherall exists for that meeting. A
as he would have wished, and that he would have large number of ‘issues’ were presented, under the three
enjoyed the promotion prospects congruent to his expe- headings of ‘staff management’, ‘agents’ and ‘business
rience, skill and industry. The only word I can use to administration’. Again, there was no suggestion of any
describe the allegation of financial impropriety is “base- financial impropriety or dishonesty, even though Mr Cox
less” and it has blighted the plaintiff ’s life in respects was being told that one of the options being considered
which will fall to be decided at some other time.’ was summary dismissal. That came as no surprise to Mr

22 The recorder was there referring to the fact that all ques-
tions of quantum had been split off for a further trial. He
McAleer, in the sense that he realised from an early stage
that, with a mutiny of staff and no support from the man-
agement, Mr Cox would have to go. The only question was
had only been concerned with issues of liability and cau- on what terms.
sation.

23 Before turning to the issues raised on the appeal and

28 So it was that, in the background, negotiations were pro-
ceeding to a settlement under which Mr Cox would receive
cross-appeal, I need to set out in greater detail the facts a lump sum of £25,000 (plus three months’ salary in lieu of
relating to Mr Cox’s departure from SAL, and to the writ- notice) for his quiet departure. There is an internal memo-
ten and telephone references given by Mr Jones to Hambro randum (212) written by Mr Jones on 22 December 1989
Guardian. In doing so, I will be drawing not only on the recording his conversation with Mr McAleer that day con-
judgment below, but also on further submissions as to the cerning such a settlement. The £25,000 offer had come
facts made by counsel in this court. Both Mr Griffith-Jones from SAL. Mr Cox wanted to think the deal over during the
QC, who appeared on behalf of SAL, and Mr Pawlak, who Christmas break. The note goes on to say that SAL
appeared on behalf of Mr Cox, recognised that in certain intended to invite Mr Cox to a disciplinary interview, which
respects the recorder’s judgment had dealt with the facts would ‘concentrate his mind to accept the settlement as he
somewhat superficially. Nevertheless, he had heard evi- knows that we will dismiss him at that interview and any
dence for some four days, not only from Mr Cox, Mr subsequent reference given will reflect this’. Nevertheless,
McAleer, Mr Jones and Mr Cosgrave, but also from Mr SAL recognised that a settlement was better than dis-
Weatherall, who was Mr Cox’s divisional manager: and Mr missal. As Mr Weatherall said in his witness statement: ‘To
Griffith-Jones recognised, with commendable realism, that pursue the allegations which had been made against Mr
he was not in a position to challenge, and he did not chal- Cox to a final conclusion would have involved a lot of time
lenge, the recorder’s views as to the credit and reliability of and effort and would have involved a number of individuals
the witnesses before him. in rather uncomfortable circumstances.’

24 In that connection, I should record at the outset, as the

prism, as it were, through which the facts have to be
29 However, matters were about to take a darker turn. On 28
December, Mr Weatherall learned from a colleague that on
looked, what the recorder said about Mr Cox and Mr Jones 20 December a Mr David McGowan, a tied agent whose
respectively. As to Mr Cox, he said this: company, Armitage & Young, owed a lot of money to SAL,
‘The parties are polarised. On the one side stands Mr had ‘volunteered’ that he had paid £1,000 by cheque to Mr
Cox asserting his good character; on the other side is Mr Cox’s wife for Mr Cox’s assistance in the purchase of a firm
Jones expounding his unshakeable belief that Mr Cox of estate agents in Bradford. Mr Weatherall discussed the
is a dishonest man. Whether he is or is not an honest matter with Mr Jones, and they decided that it would be
man is not for me to decide, though I must say that useful to have confirmation of this information. Mr Weath-
nothing I saw or heard during four full days of evidence erill made a note about this news, and commented: ‘We
would persuade me to adopt the view held by Mr Jones.’ may not wish to use – ; but – it would be valuable to have

25 As to Mr Jones, on the other hand, the recorder said:

the story formally confirmed’. Mr Jones also noted the
news, but in this form: ‘£1,000 bribe paid to M. Cox’s wife
‘My impression of him as a witness was that he was an by “Armitage & Young”?’ The word ‘bribe’ appears to be
inveterate casuist to say the least, and at times I was in entirely Mr Jones’s own word.
[2001] IRLR 452 Cox v Sun Alliance Life Ltd: Rix LJ

30 On the same day, 28 December, Mr Weatherall wrote to Mr

then concluded:
‘It has been and will remain our intention to ensure that
Cox to invite him to a ‘further disciplinary hearing’ on 5 Mr Cox is fully informed of our investigations and devel-
January 1990. Nothing was said about the £1,000 pay- opments.
ment. In the event, that meeting was postponed a number Accordingly, I must advise you that new information,
of times and did not take place until 5 February. of a very serious nature, has come to our attention and

31 On 3 January 1990, a Mr Wills, the marketing and devel-

opment manager at SAL’s headquarters in Horsham, tele-
if the reported incident is substantiated, it clearly has
serious implications on Mr Cox’s role as a manager.
It has been alleged that Mr Cox received an
phoned Mr McGowan for further information. In confir- improper payment, directly related to his role as a
mation of that telephone conversation Mr McGowan wrote Sun Alliance manager, involving the payment of a
a long letter to Mr Wills in which he made a raft of alle- cheque to his wife and the introduction of a firm of
gations against Mr Cox. Amongst them was that he, Mr estate agents to appointed representatives, Armitage
McGowan, had made two payments to Mr or Mrs Cox & Young …’
totalling £1,250, as a ‘fee’ for introducing Mr McGowan to
a friend of Mr Cox’s who was dying of cancer and wished to
sell his estate agency business. Mr Cox, it was said, would
38 It may be noted that there was no charge of dishonesty;
that only one payment was referred to; and that the sug-
even arrange to bring pressure on his friend to reduce the gestion being made was not so much that the estate agents
price. Mr Cox had requested cash, but as Mr McGowan had been introduced for the purpose of a business sale, but
was ‘unable to obtain such an amount in cash I drew a for other purposes directly relating to Mr Cox’s role as a
cheque …’ The letter did not date these events, but Mr manager.
Wills’s note of their telephone conversation ascribed them
to May 1988. 39 On 18 January, Mr McAleer replied to Mr Weatherall. So

32 Another note by Mr Jones at about this time stated:

‘Cox offered [McGowan] leads + requesting payment for
far as the new allegation was concerned, Mr McAleer
pointed out that the information in Mr Weatherall’s letter
conflicted with other information that SAL had orally
providing them’. The note went on to describe Mr Wills’s given him concerning both a payment by cheque for £250
view of Mr McGowan as ‘naïve but straight – wants to on 28 February 1989 and a payment of £1,000 in cash on 6
clear his name – continue doing business with Sun A.’ It January 1989. He pointed out the need for all relevant
also said that Mr Cox had upset Mr McGowan over files to be made available.
some matter.

33 On 9 January, Mr Wills made a file note of a further tele-

40 Mr Weatherall replied on 26 January. He said that he
thought that the nature of the new allegations was ‘per-
phone conversation with Mr McGowan. He had then fectly clear’; that SAL were very anxious to be fair to Mr
reminded Mr McGowan that the latter’s letter of 3 Janu- Cox; and that at the meeting ‘we will, of course, give
ary had failed to include a matter which he had obviously details of any supporting evidence that we have and simi-
mentioned to Mr Wills in their previous telephone conver- larly ask Mr Cox to respond’.
sation, namely that Mr Cox had tried ‘to make a personal
gain from providing leads’. Mr McGowan said that this
was an oversight and that he would write confirming this.
41 On 1 February, Mr McAleer replied to say that, with reluc-
tance, he was prepared to allow his member, Mr Cox, to
(He never did.) He also promised Mr Wills that he would attend the meeting on 5 February, provided that all alle-
immediately provide details of the payments he had made gations were explained in full and that all relevant docu-
to Mr Cox. ments were identified and made available.

34 On 12 January, Mr Wills spoke to Mr McGowan yet again.

Mr McGowan again promised ‘the documentary evidence
42 On 5 February, Mr Cox and Mr McAleer met Mr Weather-
all and Mr Jones. Previous SAL letters had described it as
that cheques had been paid to Mrs Cox …’ He said that he a disciplinary hearing, but at trial Mr Weatherall accepted
would prefer his letter of 3 January not to be handed out that it was not. There is a full note of the meeting. Mr
at the then imminent meeting planned with Mr Cox McAleer spoke for Mr Cox throughout. So far as the
‘although he accepted that it could be used at a tribunal’. McGowan allegations were concerned, the only ‘charge’
Later that day Mr McGowan handed to a SAL represen- put was ‘an improper payment made by Armitage &
tative at Leeds a handwritten note confirming that his Young’. The SAL representatives refused to hand over Mr
companies had made payments to Mr Cox in the amount of McGowan’s statement, or even to acknowledge its exis-
£1,250. He now said that on 6 January 1989 he had given tence. In response Mr McAleer refused to allow Mr Cox to
Mr Cox ‘a brown envelope containing £1,000.00 in cash …’ do more, pending receipt of Mr McGowan’s statement,
He also said that on 28 February 1989 he had paid a than to deny the receipt of any cash, to admit the receipt of
cheque for £250 to Mrs Cox, and a photocopy of the cheque the £250 cheque to his wife, and to assert that the pay-
stub was produced. The stub referred to ‘Introducer’s fee’. ment was not an ‘ improper payment’ and did not relate to

35 On the same day Mr Jones made a note of a telephone con-

his role as a manager for SAL. There were repeated
exchanges to the same effect. For instance, Mr Jones said:
versation with Mr McAleer. He explained that the reason ‘For the record, JMC refuses to answer why the payment
why SAL’s settlement offer (the £25,000 offer) had been was made.’ Mr McAleer replied: ‘He’s not refusing – he will
withdrawn was because of ‘extra evidence relating to explain if he gets the statement.’ The SAL representatives
Armitage & Young’. Mr McAleer said that SAL must put emphasised that without an explanation, they would have
this evidence in front of Mr Cox, and Mr Jones confirmed to decide on the material available.
that it would be. That conversation, however, was perhaps
overtaken by Mr McGowan’s request to Mr Wills that his
letter not be used. For whatever reason, as will be seen,
43 Mr Cox may have been poorly advised not to give his
explanation of the payment of £250 to his wife on this occa-
SAL refused to produce it. sion, and it can be appreciated how this would have made

36 I would infer that it was at about this stage of events that

a poor impression on SAL’s managers. Nevertheless, if Mr
McGowan’s allegations, or Mr Cox’s response to the lim-
Mr Jones scribbled a note raising queries as to what would ited charge put relating to the £250 cheque, were being
be said in any reference, and what SAL would do if Mr Cox seen by SAL or Mr Jones, without more, as grounds for Mr
asked ‘for evidence’. Cox’s dismissal, that would have been unfair. I would in

37 On 16 January, Mr Weatherall wrote to Mr McAleer. It

was a detailed letter answering 19 specific queries, many
general refer to the judgment of my Lord, Lord Justice
Mummery, which I have had the opportunity of reading in
draft, and with which I would gratefully agree, on the sub-
of them of a documentary nature, all in relation to the ject of unfair dismissal and the test in BHS Ltd v Burchell
earlier issues raised concerning management. The letter [1978] IRLR 379.
Cox v Sun Alliance Life Ltd: Rix LJ [2001] IRLR 453

44 I would also emphasise the following matters. It was never

tions in particular. Mr McGowan was never interviewed.
Indeed, he remained in place as a tied agent. He was not
stated at any stage throughout the interview of 5 February subsequently used as a witness for SAL at the trial. The
that there was any suggestion that Mr Cox had been act- one exception I have just referred to is that at this stage in
ing dishonestly or corruptly, or that he had been seeking or February 1990 a special audit investigation was conducted
taking bribes in return for favours (‘leads’), or anything of into Mr Cox’s papers in his Leeds’ office. The internal
that sort. That is what McGowan may have been suggest- audit team’s report concluded:
ing, and what Mr Jones may have believed, but it was ‘The office search was conducted over a two-day period,
never put to Mr Cox. The only matter that was put to Mr a large number of files were reviewed to identify
Cox was ‘an improper payment’. Even that was put in a unusual items, no evidence of fraudulent activity was
curious way. Mr McGowan’s allegation had been that there identified.’
had been two payments, totalling £1,250, at different dates
and in different modes, but that they were both for the
same purpose. However, both in Mr Weatherall’s letter
48 On 14 February Mr Cox, as applicant, referred the dispute
as a ‘request for conciliation’ to ACAS. By 15 February Mr
dated 16 January and in the interview itself, SAL only McAleer had already developed a draft narrative of Mr
mentioned one payment (‘an improper payment … involv- Cox’s career at SAL for incorporation into an agreed ref-
ing the payment of a cheque to his wife’; ‘an improper pay- erence, and he submitted it on that day to Mr Jones. On
ment made by Armitage & Young’). The only reference to 28 February, Mr Cox had an interview with Mr Cosgrave
£1,000 in cash had been made orally to Mr McAleer, and at Hambro Guardian. By 2 March the negotiated settle-
even at the interview, it was Mr McAleer, not the SAL rep- ment had been agreed, subject to the formalities. On that
resentatives, who, because of the information that had day Mr Cox wrote to Mr Weatherall tendering his resig-
been given to him orally, raised the matter of the £1,000 nation as from 12 March, conditional on the agreed settle-
cash. SAL’s ambivalence about the £1,000 cash can, with ment. The agreed compensation had now fallen to £15,000,
hindsight, be understood. When the full documentation plus three months salary in lieu of notice. On 5 March Mr
concerning Mr McGowan’s allegations is scrutinised, as Cox had a second interview at Hambro Guardian, and on
SAL had been able to do all along, his prevarications con- 9 March he accepted an offer of employment from Mr Cos-
cerning the £1,000 (cheque or cash) are there to be seen. grave. The COT3 agreement was formally signed by Mr
At the time, however, SAL were unwilling, despite earlier Cox on 14 and by Mr Jones on 16 March. It contained the
promises, to disclose to Mr McAleer and Mr Cox what Mr following paragraph:
McGowan had written. Of course, they were not able to do ‘The respondent [SAL] agrees to provide the applicant
so, quite apart from Mr McGowan’s desire for confiden- with a reference, the wording of which has already been
tiality, because what Mr McGowan had written went fur- agreed between the respondent and the applicant’s staff
ther than they were themselves willing to use (but on the union representative, Mr K McAleer.’
other hand omitted the subject of the payment for ‘leads’)
and also contradicted itself on the subject of the £1,000. It
now seems reasonably clear that SAL were not prepared to
49 I shall address the terms of that agreed reference in the
next section of this judgment.
rely on what Mr McGowan had said or written about the
£1,000, but nevertheless were prepared to allow Mr
McAleer and Mr Cox to believe that that too required an
50 The agreed reference
I can deal with this matter more briefly than would oth-
answer. To Mr McAleer and Mr Cox, on the other hand, erwise be the case because, at a time when the appeal
the two payments must have seemed to be inextricably hearing had already well exceeded its estimated length,
linked, as they were on Mr McGowan’s part. In these cir- counsel for both parties agreed that it was unnecessary for
cumstances, although I believe it would have been much the court to hear completed argument on Mr Cox’s cross-
better for Mr Cox to have explained the £250 payment to appeal on the question of breach of contract, if SAL’s
his wife, I have some sympathy for his decision not to. He appeal against the finding of liability in negligence were
had put himself in the hands of Mr McAleer, whose advice to fail. In particular, Mr Griffith-Jones was content that
was not to do so until the evidence which had been he had said anything he wished to say on the later ques-
promised was produced. Moreover, the £250 was tied up tion of such liability.
with the £1,000 in respect of which Mr Cox was adamant
that Mr McGowan was lying. Furthermore, Mr McGowan
was, probably correctly, believed to have his own axe to
51 In the circumstances submissions concerning the question
of breach of contract were never completed and no decision
grind. is being rendered on that issue in this judgment. Anything

45 At trial, Mr Weatherall was asked why Mr McGowan’s let-

that is said about it must therefore partake of a degree of
provisionality. Nevertheless, something must be said, for
ters had not been produced to Mr Cox. He said it was on the agreement forms the background to what came later.
the advice of SAL’s lawyers, but also accepted that he, per-
sonally, would not have been happy to have produced
them, without first interviewing Mr McGowan himself.
52 The agreement was negotiated between Mr McAleer and
Mr Jones. There was some dispute at trial as to the word-
The recorder regarded that as a ‘key’ answer, for it demon- ing of the agreed reference, but I do not consider that there
strated that the elementary step of testing the reliability is really much doubt about that. The COT3 form stated
of Mr McGowan’s evidence was never taken. I would agree that ‘the wording … has already been agreed’, and there
with that. In fairness to SAL, Mr Weatherall also said that is indeed a reference form which has been filled up in Mr
SAL never got to the point of deciding whether they would Jones’s own handwriting, albeit it is not signed by him. I
dismiss Mr Cox. If they had, his would have been the rec- have already said above that the form’s question ‘For what
ommendation, even if not the final decision. But ‘it did not reason was the employment terminated?’ was answered
reach that point.’ ‘Mr Cox resigned’, and that the next (fourth and final)

46 Despite that evidence at trial, on 8 February 1990 Mr

question ‘Please give your impression of the applicant as
an employee together with any additional information
Weatherall wrote to Mr Cox to say ‘we now believe that we which you feel must be helpful to us’ was answered by ref-
are in a position to make a decision in this case’ but that erence to a narrative which Mr McAleer had developed
they wanted to give Mr Cox a further opportunity to pro- and agreed. On the form itself, that last question was left
vide an explanation concerning (inter alia) the £250 pay- blank, but the narrative in Mr McAleer’s handwriting,
ment. Mr Cox replied on the next day to say that Mr amended by snowpaked deletions from the first draft
McAleer would be in contact regarding such matters. which had been submitted to Mr Jones, was evidenced by

47 By now, however, the dispute re-entered a negotiating

stage. As far as matters appear from the documents, SAL,
Mr McAleer’s note that ‘Agreed reference is standard form
plus “extra” information to “4”’. It is regrettable that such
an important matter to the parties was not dealt with
with one exception, took no further steps to investigate more clearly, as would have been achieved if the space for
their complaints against Mr Cox or Mr McGowan’s allega- answering question 4 had itself been filled in by reference
[2001] IRLR 454 Cox v Sun Alliance Life Ltd: Rix LJ

to the agreed narrative, if the form and the agreed narra- ‘Mr Bartholomew could have attempted to negotiate fur-
tive had then been signed or initialled on behalf of both ther with Hackney over the terms in which any refer-
parties, and if the reference as a whole, both form and nar- ence might refer to the circumstances of his departure,
rative, had been attached to the COT3 form. As it is, how- but either he did not try to do so or if he did he was not
ever, the COT3 form did refer in terms to a ‘wording … successful. Had it omitted all reference to the suspen-
which has already been agreed’, and for present purposes sion and to the disciplinary enquiry Hackney might
it is sufficient if I merely indicate my opinion that that well, it seems to me, have considered itself as failing in
agreed wording can be identified. Mr Griffith-Jones did its civil duty to other local authorities, their ratepayers
not, I think, dispute any of this. and clients. That must be true even though the charges
against Mr Bartholomew were unproven and now, as I
53 The remaining difficulty is as to whether, and if so how,
that agreed wording was supplemented by a further oral
have said, are unlikely ever to be adjudicated on.’

agreement. Mr McAleer gave evidence that he and Mr

Jones agreed that ‘if further questions were asked’, Mr
59 That, as far as it goes, suggests that if an employer, mind-
ful of its overall duties, does make an agreement for a
Jones would seek to answer in the spirit of the agreed future reference, it may be held to it.
wording. It was his ‘ understanding’ of such agreed refer-
ences, however, that direct questions would have to be
given direct answers. Mr Jones, in an answer quoted by
60 In any event, none of such issues have to be resolved.
Moreover, although at one time in his skeleton argument
the recorder, said that he and Mr McAleer had agreed that Mr Griffith-Jones seemed to be suggesting that the con-
‘if specific questions were asked, I would have to answer tractual argument might affect the appeal on the question
them truthfully’. of breach of duty, for instance through the possibility that
a positive agreement that all specific questions had to be
54 That is all very well, but when this oral agreement was
tested by reference to what Mr Jones should have said if
answered honestly might curtail the duty of care which
might otherwise operate to protect Mr Cox, by the end of
asked a direct question as to his opinion of Mr Cox’s hon- the hearing that submission had not been pressed. It was
esty, Mr McAleer said that Mr Jones should have not submitted that, if SAL were otherwise in breach of
answered that positively, since ‘at the point that he left their common law duty to take care in giving a reference
their employment, he had not been proven, in any way, to for Mr Cox, they were saved by any special agreement
be dishonest’ (9 June 1999, at p.134). Although Mr with him.
McAleer had got the distinct impression that Mr Jones ‘did
not like Michael Cox and believed that allegations made
against him were true’, nevertheless –
61 The Lautro rules
Mr Griffith-Jones did not seek to draw much, if any, assis-
‘you could have divorced yourself from your own per- tance from the Lautro rules. They were there in the back-
sonal feelings and say that somebody is innocent until ground, and he sought to say that they provided the con-
they are proved guilty’ (at pp.170/171). text in which the agreement for a reference should be
construed. But since Mr Jones said he was not contracting
55 The question was raised as to whether the agreement as to
a reference had been made against the background of the
by reference to them, and sought no assistance from SAL’s
compliance department, and even appeared to be unaware
Lautro rules: but both Mr McAleer and Mr Jones said that of the existence of any compliance department, Mr Grif-
neither of them had been contemplating the sort of refer- fith-Jones was unable to deploy regulatory considerations
ences which would be required by Lautro. That is a prob- very far.
lematical issue which in the circumstances does not have
to be resolved. 62 In Spring, where the claimant also worked in the insur-
ance industry, the House of Lords had to consider whether
56 In the event, the recorder found that Mr Cox’s claim in
contract failed, since, as he put it, ‘there was no consensus
the Lautro rules affected the existence or qualified the
extent of the common law duty of care there in issue. Their
ad idem on the specific question of how Mr Cox’s honesty Lordships held that they did not.
would be described in any future reference.’
63 Rule 3.5 is the rule in question. It was amended on 27 Feb-
57 It is perhaps as well that the cross-appeal in contract did
not have to be fought to a conclusion, for it would have
ruary 1990, shortly before Mr Cox’s departure from SAL.
The amended rule provided as follows (I have put the
raised some difficult questions, of fact, construction and amendments in italics):
law. For instance, was there, properly speaking, any side- ‘(1) A person shall not be appointed as, or be permitted to
agreement to the COT3 agreement at all, and if so, what continue to work as, a company representative of a
was it? Was it open to SAL to rely on any side-agreement member unless the member is satisfied that he is of
in the face of the contractual term that the ‘wording’ of a good character and of the requisite aptitude and com-
reference for Mr Cox ‘has already been agreed’? Was Mr petence for that appointment, and before appointing any
Jones entitled to say that the agreed reference did not person as a company representative, the member shall …
cater for a question as to honesty? If Mr Jones was enti- take up appropriate references relating to character and
tled to go beyond the agreed wording, was it within the experience. (2) A member which receives an enquiry for
‘spirit’ of that agreement to cast any doubt upon Mr Cox’s a reference in respect of a person whom another mem-
honesty? Was Mr Jones entitled to go beyond even the ber or appointed representative is proposing to appoint
‘spirit’ of the agreement, in answer to a direct question? If, as a company representative shall provide the reference
in answer to a direct question, Mr Jones might have been within 15 working days of the date on which the enquiry
tempted to go beyond the spirit of the agreed reference, is received, and in providing the reference shall make
would Mr Jones rather have been obliged to say that the full and frank disclosure to the person making the
reference had been agreed in settlement of a dispute and enquiry of all relevant matters which the member
he was not at liberty to say more? How might the Lautro believes, or has reasonable grounds for believing, to be
rules affect either the interpretation of the agreement that true …’
had been made, or its implementation? How might any
contractual duty be reconciled with SAL’s duty as a mem-
ber of Lautro, if indeed the duties were reconcilable?
64 The previous version of rule 3.5 can be seen set out in
Spring at 468, 37. As to that, Lord Lowry said this (at 470,
55):
58 None of the earlier cases cited to this court, starting with
Spring, had been concerned with an agreed reference. The
‘When I look again at Lautro rule 3.5(2), it does not
seem to me that the obligation of a referee to make “full
only comment on the range of problems thrown up by an and frank disclosure of all relevant matters which are
agreed reference is to be found in Bartholomew v London believed to be true” is in any way incompatible with the
Borough of Hackney [1999] IRLR 246 at paragraph 21, existence of an obligation, owed to the referee’s
where Robert Walker LJ said this: employee or agent, to exercise reasonable care in the
Cox v Sun Alliance Life Ltd: Rix LJ [2001] IRLR 455

giving of a reference. Indeed, it might without difficulty took affect on 27 February 1990):
be implied that, in the interests of the recipient, a ref- ‘The member by which a company representative is
erence should be a careful one as well as being full and appointed shall give notice to the board of the appoint-
frank. Rule 3.5(2) cannot be determinative of the exis- ment, and of the termination of that appointment; and
tence of a duty owed by the referee to the subject of a any such notice shall be in the form prescribed by the
reference or of the nature of that duty, if one exists.’ board and shall be given within 10 working days of that
appointment or termination, as the case may be and if
65 I do not see how the changes to rule 3.5 affect the duty
found in Spring. It might perhaps have been possible to
the termination was for misconduct or if the company
representative resigned while under investigation for
argue that the distinction drawn, on the new wording, misconduct, the notice shall include a statement of that
between matters which the member ‘believes, or has rea- fact.’
sonable grounds for believing’ to be true could lead to a
new assault on the existence of the duty of care, on the
basis that all that could be required in the circumstances
70 However, SAL did not at any time notify Lautro of any
concern about Mr Cox in connection with the termination
was a duty to the employee to be honest. Under the previ- of his employment: there was no suggestion that he had
ous wording – ‘disclosure of all relevant matters which are left for misconduct, nor that he had resigned while under
believed to be true’ – it was perhaps easier to say, with investigation for misconduct, nor that any ‘complaint of
Lord Lowry, that it was to be implied into the rule that the significance’ as that concept is used in the Lautro rules
reference was to be a careful one. That implication is had been made against him.
harder to make under the new wording of the rule.
71 The reference to Hambro Guardian
66 However, although Mr Griffith-Jones did at one time sub-
mit that the Spring duty of care was fulfilled provided the
It is now necessary to consider the references given by Mr
Jones to Ms Wytchard and to Mr Cosgrave at Hambro
giver of the reference was honest (as the recorder found Guardian in greater detail, prior to resolving whether the
Mr Jones to be), and his skeleton argument had been recorder was right to conclude that those references were
largely premised on that submission, he did not submit given in breach of SAL’s duty of care.
that the new wording of rule 3.5(2) undermined the Spring
duty. Moreover, he ultimately accepted that honesty was
not an answer to carelessness.
72 It will be recalled that Mr Jones’s conversations with Ms
Wytchard and Mr Cosgrave were initiated by Mr Jones’s
letter to Hambro Guardian dated 2 July 1990. That letter
67 It may seem odd that the amended Lautro rule could
require a member to provide a reference whose careless-
accompanied Mr Jones’s completion of Hambro Guardian’s
reference form. The form asked ‘Did you find the applicant
ness was overlooked in the cause of frank disclosure of (a) Honest (b) Loyal (c) Capable of working well without
honest belief. One can see, nevertheless, that as between supervision (d) Able to get along with others?’ To which Mr
member and member, and as between members and the Jones answered ‘Yes’ to (b) and (c), and answered merely
regulator, honest frankness could be promoted even above ‘Not suited to branch manager position’ to (a) and (d). To
carefulness. There was, however, no submission in this the question ‘Would you employ the applicant again?’ Mr
court as to how the Lautro rule should operate where the Jones said ‘Not in the same capacity’, which I suppose oth-
referee is careless, ie has no reasonable ground for his erwise implies Yes. To the question ‘Is there any other
belief, but honest, ie where he honestly, albeit carelessly, information you feel would be useful?’ Mr Jones answered
believes in the disclosure provided. Moreover, it seems to ‘Mr Cox has been a successful salesman who regularly
me that as between referee and the subject of the refer- appeared in the “top 10 salesmen”.’ Obviously, he was not
ence, different considerations apply, and, as Lord Lowry willing to put any other information into writing.
said, the rule cannot be determinative of the existence or
nature of the duty owed by the referee to the subject of the
reference. Lord Goff spoke to similar effect (at 468, 37).
73 It was Ms Wytchard who was the first to speak to Mr
Jones on the telephone. She did not give evidence, and Mr
Lord Slynn of Hadley, albeit speaking in the context of con- Jones denied speaking to her, so her notes of the conver-
tract, thought that, even though the unamended rule did sation provide the only direct evidence of what was said.
not require the taking of reasonable care by the referee, a Those notes make it clear that Mr Jones began by request-
term should be implied as a matter of necessity in the con- ing Ms Wytchard to treat matters in strict confidence, and
tract between an employer and an employee that the to be careful of what information was disclosed to Mr Cox.
employer would be careful in giving his employee a refer- Perhaps Mr Jones was mindful of his contractual obliga-
ence (at 475, 105). Lord Woolf, on the other hand, like Lord tions. Mr Jones next mentioned the fact that Mr Cox had
Lowry, regarded the Lautro rules as requiring references been suspended on 14 November 1989. He went on to refer
to be not only full and frank but also, by implication, accu- to Mr Cox’s difficulties with his staff. A little later Ms
rate (at 478, 123). Wytchard noted the following: ‘an agent approached [SAL]
direct re money changing hands. Proved unsatis nature as
68 Thus, although their Lordships did not all reason the mat-
ter in an identical way, the general approach of the major-
mgr … admitted to receiving amount from agent direct to
wife in chq form. Larger amount not proved. £250 not
ity (for Lord Keith dissented) was that the Lautro rules admit to £1,000 … Wld have dismissed.’
could not control the common law duty of care. Neither
public policy, nor the approach of the law of defamation
with its qualified privilege, nor the urgent demands of
74 Mr Cosgrave said that Ms Wytchard was the chief compli-
ance officer at Hambro Guardian. After speaking to Mr
freedom of speech, should prevail over the duty of care Jones, she advised Mr Cosgrave that there appeared to be
owed to the subject of the reference. It ought to follow that definite undertones and that it was necessary to enquire
the precise requirements of the Lautro rules should make further. So it was that Mr Cosgrave spoke to Mr Jones
no difference. Rather, the likely disaster for the individual himself. His notes of that conversation are quite detailed.
of a careless reference should outweigh the mere possibil- They begin with a reference to Mr Cox’s success as a sales-
ity that the public would be protected by greater latitude man and to his entrepreneurial nature. They continue
for frankness on the part of the referee. As Lord Woolf con- with less positive comments on his character. Ultimately
cluded (at 481, 143): ‘two problems’ are identified: the first was his problems
‘When I weigh these considerations I find that public with his staff (‘fell out with ALL his staff’); and the second
policy comes down firmly in favour of not depriving an was the McGowan allegations. The latter are noted in the
employee of a remedy to recover the damages to which following terms: ‘very concerned with relationship with
he would otherwise be entitled as a result of being a vic- tied agents – little too close (inducements passed hands?)
tim of a negligent reference.’ … got to the point where he was suspended! for investiga-
tion into above. Very long + drawn out hard to prove any-
69 I should also mention that Lautro rule 3.5(3) contains the
following (again I put into italics the amendment which
thing. Out of court settlement to allow him to resign.
Doubts about honesty! 2 payments from an agent? Great
[2001] IRLR 456 Cox v Sun Alliance Life Ltd: Rix LJ

shame: he was a great salesman …’ merely improper, nevertheless the admitted receipt of a
payment from a tied agent without explanation was prima
75 I accept the submission of Mr Pawlak that the implication
of these remarks was as serious as it could be. It was sug-
facie dishonest and justified Mr Jones’s remarks to Ham-
bro Guardian. As for the statement that Mr Cox would
gested that the real, or at least one of the real reasons why have been dismissed, that merely recognised, as Mr
Mr Cox was suspended (‘got to the point where he was sus- McAleer himself had done from the start, the inevitability
pended! for investigation into above’) were the allegations of Mr Cox’s departure.
of dishonesty; that those allegations were properly inves-
tigated (‘very long + drawn out’); that those allegations
involved a cosy and corrupt relationship with not just one
78 Above all, or as what Mr Griffith-Jones termed his best
point, he submitted that the existence of the admitted
but a number of tied agents who were bribing Mr Cox or receipt of the £250 by Mr Cox’s wife, without explanation,
being bribed by him (‘very concerned with relationship was something which on any view Mr Jones was entitled
with tied agents – little too close (inducements passed?); to reveal; and that on the evidence, that would have been
that, although it was hard to prove anything, a proper sufficient to have prevented Mr Cox from remaining at
investigation had left SAL with a reasonable basis for Hambro Guardian, since in his evidence Mr Cosgrave had
doubting Mr Cox’s honesty (‘Doubts about honesty!’); that made it clear that only a reference without any blemish
in those circumstances, and where SAL would have dis- would have sufficed. Therefore, even if Mr Jones had oth-
missed him (as Ms Wytchard was told), Mr Cox was nev- erwise been in breach of his duty of care, such breach did
ertheless allowed to resign (‘out of court settlement to not cause any loss to Mr Cox, for he would have been
allow him to resign’). Nothing was said to the effect that required to resign from Hambro Guardian in any event.
the settlement had involved an agreed reference which Mr Griffith-Jones described this as a point of causation,
deliberately omitted any mention of these matters. and I will deal with it as such under the heading of causa-
Whereas the truth was that Mr Cox had been suspended tion below, together with SAL’s other point on causation:
for matters wholly unconnected with the McGowan alle- that it was not Mr Jones’s reference that had caused Mr
gations; that those allegations had never been properly Cox’s departure from Hambro Guardian, but Mr Cox’s own
investigated, if indeed they could be said to have been failure, at the time of interviewing for his job with Hambro
investigated at all where Mr McGowan had never been Guardian, to reveal to Mr Cosgrave the circumstances of
interviewed by anyone concerned with Mr Cox’s case; that his resignation from SAL.
with the exception of the £250 cheque (and possibly the
£1,000 as well) these allegations had never even been put
to Mr Cox; that Mr Jones’s doubts about Mr Cox’s honesty
79 In connection with his submissions on the issue of breach,
Mr Griffith-Jones relied heavily on the decision of this
were not based upon any proper enquiries; that a two day court, subsequent to Spring, in Bartholomew v London
search and audit of Mr Cox’s papers had turned up not a Borough of Hackney. He criticised the recorder for paying
shred of evidence against him; that SAL had had such inadequate attention to this authority. Mr Bartholomew
doubts about the £1,000 allegation that they had never had been employed by Hackney as head of its race equal-
properly charged Mr Cox with it; that SAL had never ity unit. He was suspended pending investigations into
reached the point where they had decided to dismiss him alleged financial irregularities, and ultimately faced dis-
on the ground of these allegations; that Mr Cox was there- ciplinary proceedings concerning those allegations. Mr
fore not so much allowed to resign as paid off under a set- Bartholomew thereupon brought a complaint to an
tlement which provided him with tax free compensation employment tribunal alleging racial discrimination. Dur-
for the loss of his employment; and that the settlement ing the course of the hearing of that complaint, the parties
included an agreed reference in complimentary if bland reached a settlement: Mr Bartholomew took voluntary
terms. severance with salary in lieu of notice, and withdrew his
complaint. The settlement also recorded that the discipli-
76 Mr Cosgrave recognised the absolute seriousness of this
report. He said of his telephone conversation with Mr
nary proceedings automatically came to an end with the
termination of his employment. Over a year later Hack-
Jones (8 June 1999 at pp.36/37): ney was asked by another local authority for a reference
‘A. Well, I remember the phone call very well, and I had for Mr Bartholomew. The reference given stated the fact
described it to somebody else after that this man was that Mr Bartholomew had taken voluntary severance and
gleeful giving the information he gave: that was the way included the information that at the time of his departure
I felt. There was an enthusiasm, almost, to go into detail he had been ‘suspended on a charge of gross misconduct
and make remarks that were innuendo … the informa- and disciplinary action had commenced. This disciplinary
tion that I was now receiving that Michael Cox’s career action lapsed automatically on his departure from the
in financial services was over. Not only would he … have authority.’ Mr Bartholomew accepted that the reference
to terminate his employment with us, but he was not was factually correct, but submitted that Hackney was in
going to get back into financial services again … Yes, breach of its duty of care because the reference it had
that is why I was quite surprised at the – almost the given was unfair. He failed both at trial in the county court
enthusiasm that was being shown to me down the and on appeal.
phone. This was a sort of “no way out” conversation … it
was hinted that there was questions of money passing
hands of, almost like bribery going on …’
80 Mr Griffith-Jones submitted that the present case was on
all fours with Bartholomew in that (a) serious allegations
of financial impropriety had been levelled; (b) disciplinary
77 Was the reference to Hambro Guardian in breach of
a duty of care owed to Mr Cox?
proceedings had been overtaken by a settlement; and (c)
there was no constraint on the employer’s freedom to
Mr Griffith-Jones accepted the existence of a duty of care express its opinion (as for present purposes is being
owed to Mr Jones in the giving of SAL’s reference. He assumed). Indeed, he submitted that SAL’s case was
accepted that such a duty of care went beyond mere hon- stronger than Hackney’s in that the recorder below found
esty of belief in the reference given. He also accepted that, that Mr Jones had an unshakeable belief in Mr Cox’s dis-
at any rate in respect of matters that went beyond the honesty, and in that the Lautro rules underlined the pro-
acceptance of the cheque for £250, such as the suggestion fessional duties of members in relation to the provision of
that Mr Cox had been corruptly taking bribes, Mr Jones references and the importance of full and frank disclosure.
had acted in breach of his duty of care. He submitted, never-
theless, that Mr Cox’s admission that his wife had received
a payment of £250, in the absence of any explanation, was
81 In my judgment, however, the significance of Bartholomew
is to be found not so much in the result of the case but in
a sufficient basis for raising doubts about Mr Cox’s hon- the acceptance there of this court that the Spring duty was
esty. Although he had to recognise that a charge of dis- not only to take reasonable care to provide an accurate ref-
honesty had never been put to Mr Cox at the interview of erence, but also to take reasonable care to provide a fair
5 February 1990 or at any other time, and that a valid dis- reference. That point is made in the following remarks of
tinction could be drawn between the dishonest and the Lord Justice Robert Walker at paragraphs 17/18:
Cox v Sun Alliance Life Ltd: Rix LJ [2001] IRLR 457

‘…
a number of discrete statements may be factually 85 Causation
Mr Griffith-Jones submitted that such breach of duty
accurate, but nevertheless may in the round give an
unfair or potentially unfair impression to the reader. could have had no consequences for Mr Cox, since even the
That is very well understood in the law of defamation news about the £250 payment by itself, being admitted
… and without explanation, would have cost Mr Cox his job
‘Mr Bartholomew’s claim against Hackney was of at Hambro Guardian. Thus Mr Griffith-Jones relied on Mr
course a claim in negligence, not libel. Nevertheless the Cosgrave’s evidence to the effect that Hambro Guardian,
libel cases seem to me to serve as a salutary reminder as a new company, had to be particularly careful about
that the fairness or unfairness, the accuracy or inaccu- allowing any question marks to be raised by Lautro. ‘The
racy, and, indeed, the truth or falsity of a statement guiding factor,’ he said ‘had to be if we could not prove that
have to be taken in the round and in context and can- an individual was fit and proper or at least satisfy our-
not be in every case dissected into a number of discrete selves that he was, then we had to assume that he was
parts.’ not.’ Mr Cosgrave accepted that his company’s compliance
department would, even in the absence of Mr Jones’s cov-
133, 150.3 ering letter inviting further communication, have followed
82 In my judgment, in the references he gave to Ms
Wytchard and Mr Cosgrave on the telephone Mr Jones
up the absence of a straightforward answer on the refer-
ence form to the question about Mr Cox’s honesty. That
failed to take reasonable care to be either accurate or fair. was the critical question. Therefore, the submission went,
Unlike Hackney, he did not confine himself to a small the matter of the £250 payment would have had to have
number of factually indisputable statements. He inaccu- emerged in any event, and would have damned Mr Cox.
rately suggested that Mr Cox had been suspended (inter
alia) for serious matters of dishonesty; that those charges 86 Nevertheless, Mr Griffith-Jones accepted, quite properly
in my judgment, that the burden of proof of his present
had been properly brought and thoroughly investigated;
that such charges embraced what were suspected as the argument lay on SAL. In effect, SAL bear the burden of
taking of inducements from a number of tied agents; that showing that the breach of duty which took place did not
such charges went beyond the matter of the two pay- cause Mr Cox to lose his job, because that would have hap-
ments mentioned to Ms Wytchard; that in any event pened in any event. That is a heavy burden to bear. I do
those payments embraced the £1,000 in cash as well as not think that SAL are able to meet it here. Mr Cosgrave
the £250; and that it was only after thorough investiga- was never asked to say what his or his company’s attitude
tions which had satisfied SAL that they would have been would have been if Mr Jones’s reference had confined
entitled to dismiss Mr Cox, and would have done so, that itself, on matters of honesty, to a question-mark raised by
they were prepared, because it was hard to prove any- the simple facts of the admitted £250 payment and the
thing, to allow Mr Cox to resign under a negotiated set- lack of any explanation for it. It is speculation to surmise
tlement. Almost every part of that was inaccurate to a his reaction, but in all probability he would have asked Mr
greater or lesser degree. In total, the reference was Cox for his explanation. If Mr Cox had continued to refuse
wholly unfair. In the round, the reference was at the very an explanation, which is unlikely since the situation of 5
least to the effect that SAL had a reasonable basis, fol- February 1990 would not have been paralleled, he would
lowing upon a reasonable investigation, for dismissing probably have been in difficulties. But it is more likely that
Mr Cox on the ground of dishonesty amounting to cor- Mr Cox would have given an explanation to Mr Cosgrave,
ruption. In truth, whatever Mr Jones’s personal beliefs, as he did to the court at trial. He had also offered an expla-
the charges of dishonesty suggested to Hambro Guardian nation, through Mr McAleer, to SAL at about the time of
had never so much as been put to Mr Cox (not even in his leaving, but the offer was not taken up. At trial Mr Cox
connection with the £250 payment), never been made the explained that the payment to his wife had been in con-
subject of proper investigation, never, as it would seem, nection with work done by her on the accounts of his dying
been made the subject of formal disciplinary proceedings, friend’s estate agency business in connection with its sale
and, save for the special audit, were shelved pending to Armitage & Young. His friend had begged him to help
negotiations towards a settlement which provided Mr him sell his business before news of his illness became
Cox with a substantial tax free payment as compensation public and his business evaporated. He had taken nothing
for his departure and (whatever its precise terms) an for himself; he had spoken of ‘a small cheque’ for his wife,
agreed reference. and in the event had said that £250 was too much, but Mr
McGowan insisted on it. I have already cited the recorder’s
133, 150.3 reaction to Mr Cox’s evidence. Mr McGowan did not give
83 In such circumstances it seems to me that Mr Jones was
seriously at fault and that, save possibly under the head-
evidence for SAL; in any event, the explanation is consis-
tent with Mr McGowan’s own account. There is no reason
ing of an argument about causation, the matter of the for thinking that such a payment was improper, let alone
£250 payment cannot be isolated so as to bear the weight dishonest. The only evidence against Mr Cox in this
of the reference as a whole. Mr Griffith-Jones complains respect was Mr McAleer’s statement at 5 February inter-
that the recorder did not make clear what Mr Jones should view that the £250 ‘ was not in connection with an estate
have said instead. I do not think that that is the question. agents’. As to that, however, Mr McAleer said in his evi-
I accept that an employer in the position of SAL in this dence at trial that he may have spoken there under a mis-
case is put in a difficult position, with obligations of one understanding of the position (9 June 1999 at p.162). In
kind or another, not necessarily of a legal kind, owed sev- my judgment, SAL cannot prove that Hambro Guardian
erally to its ex-employee, to the Lautro member which would not have been satisfied with Mr Cox’s explanation.
asks for a reference, to Lautro itself, and ultimately to the As it was, Mr Cosgrave, who had seen Mr Cox in action for
public. In such a position, it is necessary above all to try a number of months, was impressed by him and able to
to be objective. It seems to me that Mr Jones did not try to describe him as ‘very committed, honest + hard working’
be objective at all. Mr Cosgrave was struck by the enthu- in his reference to Windsor Life.
siasm with which he delivered the news about Mr Cox. I
think that his lack of objectivity is demonstrated by the 87 Mr Griffith-Jones’s other point on causation was that the
real and effective reason why Hambro Guardian required
reference he gave, measured against the facts with which
he was, after all, well acquainted. However, it is also high- Mr Cox to resign was that he had not been frank with Mr
lighted by his unwillingness to face up to the truth that it Cosgrave at interview about his difficulties at SAL. Mr
was he that conducted the telephone conversations with Jones’s reference may have been the causa sine qua non,
Ms Wytchard and Mr Cosgrave. but it was not the causa causans. The basis of this sub-
mission was an internal file note which Mr Cosgrave had
84 In my judgment, therefore, SAL, through Mr Jones, were
in breach of their duty to take care in the giving of a ref-
written at some time in 1994 to the effect that Mr Cox had
not made him aware at interview of any dispute with SAL
erence for Mr Cox to Hambro Guardian. and that the Hambro Guardian board had agreed that it
[2001] IRLR 458 Cox v Sun Alliance Life Ltd: Rix/Mummery LJJ

would not be appropriate to continue to employ some-

one who had withheld information regarding the nature 92 On balance, in a jejune area of the case, I would accept
of his departure from his previous employer. Even so, that this reference was also unfair. In essence, the refer-
Mr Cosgrave expressed the opinion in that note, as a ence states or implies that Mr Cox resigned not merely as
result of his subsequent understanding of the matter, a coincidence of investigation into his conduct, but as a
that Mr Cox had been wronged by SAL in that an result of that investigation taking place. That investiga-
agreed reference had been negotiated and SAL had bro- tion is linked, in the reference, to a question about his hon-
ken that agreement. esty. The facts are, however, that Mr Cox was never
charged with an offence of dishonesty, and that his resig-
88 In his evidence at trial, however, Mr Cosgrave was able to
explain his thinking behind the note more accurately.
nation was on the cards, indeed probably inevitable, as Mr
McAleer thought, ever since the mutiny of his staff. In my
What emerged was as follows. At his interviews, Mr Cox judgment, therefore, SAL were again, through Mr Jones,
had informed him of a falling out with SAL. He had men- in breach of their duty to take reasonable care to provide a
tioned office politics and promotion not being by ability (as fair reference for Mr Cox.
noted by Mr Cosgrave at the time), but he had also made
it clear that there had been a serious falling out involving 93 In April 1992, Windsor Life spoke to Mr Jones and wrote
a disciplinary situation, which had ended in a negotiated to him for further information concerning the reasons for
settlement including an agreed reference, some sort of Mr Cox’s resignation. Mr Cox replied, declining to com-
agreed form of words. At the time Mr Cosgrave had been ment further. He said that ‘a standard reference was
satisfied by that, but when Mr Jones had spoken so openly agreed with ACAS and a copy has been sent to your offices
to Ms Wytchard and himself he had concluded that there previously’. If that was intended to refer to the agreed ref-
could not have been any agreement or agreed reference erence rather than to Mr Jones’s previous reference of 19
and that Mr Cox had been misleading him. March 1991, all I can say is that there is no other evidence
that a copy of the agreed reference was in fact sent to
89 In my judgment, therefore, the lack of frankness which
was blamed on Mr Cox was itself a consequence of Mr
Windsor Life, and Windsor Life’s own letter to Mr Jones is
inconsistent with the idea that they had already received
Jones’s negligent reference. Mr Cox was entitled, in the a copy of the agreed reference. Mr Jones added – ‘I would
first instance at any rate, and subject to any direct ques- not wish to add any further comment as this would
tions from Mr Cosgrave which required equally direct infringe the agreement.’ If, as I would be minded to infer,
answers, to rely on the fact of his settlement with SAL, no copy of the agreed reference was sent to Windsor Life,
including its agreed reference. He had said that there was Mr Jones was thereby stating that what he said in his ear-
a dispute, involving a disciplinary situation, and he was lier reference represented the agreed reference. In a situ-
not to know the ramifications which lay behind the only ation where submissions on the question of breach of con-
financial charge put forward by SAL, that of an allegedly tract were never completed, I hesitate to say anything
‘improper payment’ by cheque of £250. I do not see that further: but I am I think entitled to say that Mr Jones’s
the uncertain status of the allegation of payment of £1,000 March 1991 reference could only represent the agreed ref-
in cash alters the situation. The fact is that, at 5 February erence if that agreement permitted SAL to say or omit to
interview, SAL had not used Mr McGowan’s allegations to say almost anything. As it is, I think that the only con-
charge Mr Cox with dishonesty. Thus when at trial Mr clusion I can come to in relation to Mr Jones’s April 1992
Griffith-Jones asked Mr Cosgrave to agree, which he did, letter with respect to the issue of breach of duty, is that it
that nothing said to him by Mr Cox at interview gave any did nothing to mitigate the failure to take reasonable care
suggestion that his ‘honesty and integrity’ had been to present a fair reference, which I have found already
impugned, the question was beside the point. existed by reason of Mr Jones’s March 1991 reference to
Windsor Life.
90 In the event, Mr Griffith-Jones’s second causation point
fails as well. It was a fair criticism of the recorder’s judg- 94 It is harder to say what effect SAL’s breach of duty in rela-
ment that he had not articulated his reasons on questions tion to their reference to Windsor Life had on Mr Cox. The
of causation with any amplitude. But his conclusion was recorder made no specific findings. There has been no
clear, that but for Mr Jones’s acting as he did by commu- argument in this court on this question. Both the absence
nicating with Ms Wytchard and Mr Cosgrave, Mr Cox of findings below and the absence of argument in this
would not have been required to resign. I agree, and court probably reflect the consideration that, since Mr Cox
regard the negligent reference as the effective cause of the did not lose his employment with Windsor Life (at any rate
loss of Mr Cox’s employment. until he was forced to retire through ill health in 1998), it
was not for the trial on liability to disentangle the precise
91 Windsor Life
There remain the elements of the case which relate to
extent to which Mr Cox’s status at Windsor Life was
affected by SAL’s breach or breaches of duty. That could
Windsor Life. There was comparatively little submission only be done at a trial of quantum. If so, I agree. Mr Cox
concerning these aspects. Mr Jones’s written reference may be able to put his case in a number of different ways:
dated 19 March 1991 stated that ‘Mr Cox resigned at a either that everything flows from the loss of his employ-
time when his conduct was being investigated’. Mr Jones ment with Hambro Guardian, and/or that incremental loss
said that that sentence was included at the request of and damage flows from the separate breach of duty in rela-
SAL’s compliance department. Outside the question of tion to Windsor Life. All such argument and counter-argu-
the agreed reference, I see nothing wrong with that state- ment lie in the future.
ment in itself. On the other hand, it was given as the sole
answer to the question ‘What is your opinion of his – 95 Conclusion
In sum, therefore, SAL’s appeal fails and must be dis-
Honesty – Behaviour – Reliability’. As such, it was
hardly an adequate answer, especially against the back- missed. Mr Cox’s cross-appeal was not completed, and
ground of the agreed narrative. Even Mr Jones’s written stands in abeyance. The consequences in terms of quan-
reference to Hambro Guardian had contained the sen- tum of SAL’s breaches of duty must abide, if necessary, a
tence (under a question as to useful additional informa- separate trial of quantum.
tion) that Mr Cox had been a successful salesman who
regularly appeared in the ‘top 10 salesmen’. Moreover, 96 LORD JUSTICE MUMMERY: I agree that this appeal
since no charge of dishonesty had ever been put to Mr should be dismissed for the reasons given by Rix LJ.
Cox before he left, it does not seem to me to be fair to sug-
gest, by the only answer given on the question of honesty, 133, 150.3
that his honesty was in issue. Finally, the question ‘Did 97 If a person suffers economic loss as a result of a damaging
reference several causes of action are potentially available:
he observe the rules of Lautro?’ was left unanswered. As
far as I am aware, Mr Cox was never charged with there may be a claim for defamation or injurious falsehood,
breach of any Lautro rules. but the honest belief of the author in the truth of the ref-
Cox v Sun Alliance Life Ltd: Mummery LJ [2001] IRLR 459

erence would be a complete answer to the claim; there may investigation and had reasonable grounds for believing to
be a claim for unlawful discrimination or victimisation, be true.
but only if it can be established that the reference consti-
tuted less favourable treatment on the ground of sex or 133, 150.3
race (Coote v Granada Hospitality Ltd [1998] IRLR 656;
[1999] IRLR 452); and, following the decision of the House
103 For understandable reasons, SAL regarded further inves-
tigation into Mr Cox’s conduct as having been rendered
of Lords in Spring v Guardian Assurance plc [1994] IRLR unnecessary by his resignation. The investigations were
460, there is a duty to take reasonable care to provide an only necessary if SAL would have to make a decision
accurate and fair reference. Discharge of that duty will whether to warn him or to discipline him or to dismiss
usually involve making reasonable inquiry into the factual him. In order to discharge the duty to take reasonable care
basis of the statements in the reference. in the preparation and provision of a reference, the
employer is not, in my view, obliged to carry on with the
98 As the facts and arguments in this case demonstrate, the
judicial development of liability for negligence in this sen-
inquiry after the employee has resigned. SAL were enti-
tled to discontinue their investigation into the allegations
sitive area of employment law is fraught with practical dif- against Mr Cox after he had resigned on 12 March 1990.
ficulties. The employer who is asked by an employee or a The Recorder was wrong to find that ‘the defendant chose
prospective new employer to provide a reference may be to abandon its disciplinary proceedings (for reasons uncon-
placed in a delicate and vulnerable position when the nected with the subsequent resignation) …’
employment has terminated in contentious circumstances.
It is not uncommon, for example, for an employee’s claim
for unfair dismissal to be settled on terms under which the
104 The essential point about a reference is that it will nor-
mally satisfy the requirements of a duty to take reason-
employer, who contends that he had a potentially fair rea- able care if it is accurate and fair. Although it must not
son to dismiss the employee, agrees to provide the dis- contain misleading information or create a misleading
missed employee with a reference. The reference needs to impression, a reference does not, as a general rule, have
be satisfactory if the search for fresh employment is to to provide a full and comprehensive report on all the mate-
have any real chance of success. The provision of a satis- rial facts concerning the subject: Barthlomew v London
factory employment reference serves the interests of both Borough of Hackney [1999] IRLR 246 and Kidd v AXA
the employer and employee when they are parting com- Equity & Law Life Assurance Society plc [2000] IRLR 301.
pany. But the particular interests of the prospective new
employer and the general public interest in references 133, 150.3
which are frank and not misleading also have to be con-
sidered.
105 Accordingly SAL were not obliged to continue with the
investigation in order to give a comprehensive report on
Mr Cox, but they ought to have taken reasonable care to
99 Spring was in some respects a complex case on the facts,
but the issue of negligence, once the duty of care was held
confine unfavourable written and oral comments to those
matters which had been investigated before Mr Cox
to exist, was not particularly problematical. The special resigned and which provided reasonable grounds for state-
feature in this case, which was not present in Spring, is ments about him.
that the employee complaining of a damaging reference
resigned before the employer had completed pending dis-
ciplinary proceedings involving investigations into allega-
106 For the reasons given by Rix LJ, I agree that the Recorder
was entitled to conclude that there was negligence in Mr
tions of misconduct. In such a case, what should be done Malcolm Jones’s ‘reliance upon unexplored allegations of
by the reasonably careful employer who agrees to give or is dishonest conduct attributed to Mr Cox’ and in his subse-
asked to provide a reference? Must he continue with and quent communication of those views to Mr Cox’s new
complete the investigations before he can provide a refer- employers, Hambro Guardian and Windsor Life.
ence which will not expose him to an action for negligence?
173, 199.6
100 Inbe my judgment, some guidance in cases of this kind is to 107 I would add a final word for the benefit of employers and
found in the law relating to unfair dismissal for a rea- employees who prefer to avoid time consuming, costly lit-
son relating to conduct. An employee has a statutory right igation about job references. In a case where the terms of
not to be unfairly dismissed: s.94 Employment Rights Act an agreed resignation or of the compromise of an unfair
1996. If the reason for dismissal relates to conduct the dismissal claim make provision for the supply of a refer-
general principle applied by industrial tribunals (now ence, the parties should ensure as far as possible that the
employment tribunals) for many years has been that the exact wording of a fair and accurate reference is fully dis-
employer should have genuinely believed that the cussed, clearly agreed and carefully recorded in writing in
employee was guilty of misconduct, should have had rea- COT3 at the same time as other severance terms.
sonable grounds for that belief and should have carried out
as much investigation into the matter as was reasonable
in all the circumstances of the case: BHS Ltd v Burchell
108 THE PRESIDENT: I agree with both judgments.
[1978] IRLR 379.

101 That general principle would have applied here if SAL had
decided on 12 March 1990 to dismiss Mr Cox for miscon-
duct solely in respect of the limited charge concerning the
£250 cheque. In my view, the dismissal of Mr Cox would
not have satisfied the tripartite test in Burchell. An
employment tribunal would probably have held that dis-
missal was unfair.

133, 150.3
102 Atents
similar approach is appropriate in considering the con-
and supply of a reference about Mr Cox if it is given
without reasonable prior investigation into the various
instances of his alleged misconduct. As the events in this
case indicate, an unfair and inaccurate reference is proba-
bly even more damaging than an unfair dismissal to an
employee’s employment prospects. If SAL had taken rea-
sonable care to give a fair and accurate reference, they
would have confined unfavourable statements about Mr
Cox to those matters into which they had made reasonable