BCCI ruling sets back stigma claims

The rights of workers to claim compensation for alleged stigma suffered as

a result of misdemeanours by their bosses have been clarified in a High

Court ruling.

The decision is bad news for some 400 former BCCI staff who had sought

damages on the basis that stigma over the actions of BCCI had rubbed off on

them and damaged their employment opportunities for the future.

At the same time though, the decision in BCCI v Ali & ors on 25 June has

thrown further light on the implications of an earlier House of Lords

ruling on the same matter, says Laurence Crowley of Lovell White Durrant,

who represents the BCCI liquidators.

It has, he says, made it clear that while such claims are possible, the

proof of stigma is stringent.

BCCI was closed down in 1991 with $6bn (£3.5bn) owing to creditors.

Liquidators told the media after the collapse that fraud had permeated the

bank from top to bottom.

Later, they confirmed the majority of employees were innocent. But the

employees claimed the statements, which they said implicated them in what

had happened, were never publicly withdrawn or corrected. They argued that,

as a result, their prospects of work were damaged

In a 135-page judgment, Mr Justice Lightman ruled that although

liquidators for the collapsed bank said publicly that fraud had gone from

the top to the bottom of the bank this in itself did not entitle former

employees to compensation.

He said he sympathised with former BCCI staff who had failed or had

difficulty in finding new jobs. However, he said that the evidence before

the court had not established that their job prospects had been damaged as

a result of the BCCI stigma.

And he said he considered that evidence from three of the five claimants

that refusal of job applications had been the result of the BCCI stigma was

"plainly concocted".

Crowley stresses that Mr Justice Lightman was following a House of Lords

decision in an associated part of the case. The Lords ruled in 1997 that,

in principle, such a claim could be mounted on the basis of the implied

duty of trust and confidence between employers and employees being

breached.

"Mr Justice Lightman concluded that the extent of the wrongdoing by BCCI

prior to its collapse was such as to constitute a breach of the implied

duty of trust and confidence owed to its employees," says Crowley.

"However, he went on to find that it had not been established in any of

the five test cases that the breach had in fact caused financial loss to

the claimants. He made it clear that damages could only be recovered in

respect of financial loss suffered by an employee which stemmed from that

breach.

"An employee could not recover general damages from the alleged stigma

itself: loss of reputation.

"In addition, the loss had to be actual and not hypothetical. It was not

sufficient, as the employees had claimed, to show that if it were not for

the alleged stigma, they would have obtained a job within a particular

period, irrespective of whether they had in fact applied for the job.

"He made it clear that in most circumstances, a claim of stigma could only

succeed if evidence was provided by a prospective employer that they had

ruled out a job applicant because of stigma.

"The onus was very much on the employees to establish that they were

rejected because of stigma.

"The judge has made it clear that, so far as the remaining claims are

concerned, the hurdles the claimants face are substantial and that any

further litigation is likely to be protracted and expensive.

"He stated that the greatest caution was called for before further

proceedings were instituted or continued and that in the absence of

reliable evidence by prospective employers the prospects of further claims

succeeding were small."