#6642 - University Of Nottingham V. Fischel - Commercial Remedies BCL

University of Nottingham v. Fischel

Facts

Dr. Fishel is a distinguished scientist with an international reputation. He is a clinical embryologist working in the field of in vitro fertilisation (“I.V.F.”). Dr. Fishel joined Nottingham University in 1985. Initially he was not solely employed by the university. He became a scientific director of a new I.V.F. clinic at the Park Hospital in Nottingham, but this was combined with a senior lectureship at the university

Nurture was set up in 1991 to operate as an infertility clinic within the university. Its full title was the Nottingham University Research and Treatment Unit in Reproductive Medicine. Broadly, the aim was to operate a self-funding institution which would provide treatment privately to infertile couples and would put the university at the international forefront of teaching and research in the field. Dr. Fishel's relationship with the university then changed, however, when he became scientific director of Nurture in 1991. At that stage his employment became full-time.

Nurture proved to be a considerable success. Having started off with a handful of staff, by the time Dr. Fishel left there were some 40 staff overall. One result of its success was that Dr. Fishel became very well rewarded under his bonus arrangements. In the financial year to 31 July 1996, his total salary exceeded that of any other university employee, including the Vice-Chancellor. The university authorities took the view that it was inappropriately high. They sought to renegotiate the terms. Not surprisingly, Dr. Fishel was somewhat resistant to any change. There were strained and protracted discussions and ultimately Dr. Fishel was told that, unless he agreed to the changes proposed, his contract would be terminated and he would be offered a new contract on terms considered acceptable to the university. He reluctantly agreed.

From his early days at Cambridge, Dr. Fishel had been involved in working at private clinics for remuneration. At that time the clinic was Bourn Hall. When he moved to the Park Hospital, he became involved in other outside clinics, all of which were abroad, and after he became involved in Nurture the range of clinics with which Dr. Fishel became involved increased, as I discuss later in this judgment. It is common ground in this case that it was vital for some research work to be done abroad if the unit was to remain at the leading edge of research. As Professor Symonds recognised, it was also important in maintaining the international reputation of Nurture. However, whilst I can give no precise answer to the contribution of the work done abroad to the research and development at the unit, I am satisfied that it was significant. If this had not been the case, I am sure that Professor Symonds in particular would have raised objections to the extent of the activity

Second, I am satisfied that these trips abroad did not prejudice the functioning of the clinic in Nottingham. It did not lead to a reduction in the number of patients that could be seen locally, nor adversely affect the treatment to patients. Finally, it is admitted by Dr. Fishel that at no time during his employment with the university did he obtain the consent of the Vice-Chancellor or any of his authorised deputies to do paid work abroad.

Relevant contractual provision in Prof. Fishel’s contract of employment provided:

“There are no specified hours of work, but the appointment is a full-time one and permission to undertake any other work for which payment will be received must previously be obtained from the council of the university through the Vice-Chancellor. This regulation is not intended to prevent the senior lecturer from undertaking a limited amount of outside work, such as examinerships, provided such work does not interfere with his/her duties at the university, but he/she will be expected to report to the head of his/her department any such work which he/she may wish to accept.”

University’s claim: In essence, the university contends that, in doing the outside work without properly authorised consent, Dr. Fishel was in breach both of his duties under his contract of employment and of certain fiduciary obligations which, it submits, he was bound by in the particular circumstances of the case. The difference between the two causes of action is that, at least on a conventional analysis, the employee can be liable to account for all the profits he has earned if fiduciary duties are broken but is only liable to compensate for loss where the claim lies in contract. However, the university also claims to be entitled, because of the particular nature of the breach in this case, to recover restitutionary compensation equivalent to the profits acquired by Dr. Fishel for the mere breach of contract alone. Its claim is limited to profits made from the date Dr. Fishel became a reader in August 1993.

Holding

No loss resulted from the breach of contract

I have no doubt that Dr. Fishel was in breach of contract in failing to obtain the requisite consent for his paid outside work. The university can seek to recover damages arising out of the breach. On the traditional view, this means they can recover such loss as has resulted from the breach. The question is what that loss is in the circumstances of this case. In order to answer this question it is necessary to identify exactly wherein the breach lies. In my opinion it is not, as the university alleges, in the failure to obtain consent. Strictly, the breach is doing the outside work. The question, therefore, is what loss has resulted from the fact that Dr. Fishel did this work. In my opinion it cannot demonstrate any loss. For reasons I have given, I consider that the university benefited from the work. In my view, if any claim for damages for breach of contract is to succeed, it has to be on the basis that restitutionary damages (or perhaps more accurately, compensation) are available, a point to which I return later in this judgment.

Restitutionary damages

The university claims that, even if it is not entitled to damages for loss on the traditional basis, it ought to be entitled to claim restitutionary damages, the sum being assessed by reference to the gain made by the defendant. It makes this claim only in so far as it fails on its fiduciary argument. The circumstances, if any, when such damages can be recovered for breach of contract, have been considered in two recent Court of Appeal cases. In Surrey County Council v. Bredero Homes Ltd. [1993] 1 W.L.R. 1361 the defendant purchased certain land from the plaintiff and undertook to develop it in accordance with certain planning permission he had obtained. This permitted him to build 72 dwelling houses but in fact he built 77. The vendor sued for breach of contract and sought to recover the profits gained by the breach, i.e., the profits accruing from the fact that five additional houses were built. The Court of Appeal, upholding the judge at first instance, held that only compensatory damages were available which, as the defendant conceded, were nominal only since no loss had been suffered. Dillon L.J. affirmed the traditional view that restitutionary damages were not available for breach of contract; Steyn L.J. thought that they could be available in exceptional circumstances, exemplified by Wrotham Park Estate Co. Ltd. v. Parkside Homes Ltd. [1974] 1 W.L.R. 798, which involved the invasion of property rights and, as Steyn L.J. pointed out, was analogous to cases where the defendant makes use of the plaintiff's property, thereby saving expense. Whilst accepting that there may be some scope for further development, he rejected both on principle and policy grounds any significant extension, particularly in areas such as commercial and consumer law where predictability is...