BCCI ruling sets back stigma claims
8 February 1999
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
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had happened, were never publicly withdrawn or corrected.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
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
"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
"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."