You may be interested in the following two cases recently decided by the EWCA, one concerning a tort claim for psychiatric harm and the other a contract claim which raised issues of the role of good faith in contract law.

In Taylor v A Novo [2013] EWCA Civ 194, the admitted negligence of the defendant, Novo, resulted in a workplace accident which caused its employee, Mrs Cindy Taylor, to suffer head and foot injuries, from which Mrs Taylor unexpectedly passed away three weeks later. As a result of the sudden death, the plaintiff, Ms Taylor (Mrs Taylor's daughter), developed PTSD. The plaintiff sued Novo claiming damages for psychiatric harm.

There was no dispute over the "control mechanisms" devised by the House of Lords in Alcock and Frost; the issue was whether the plaintiff was sufficiently proximate to the accident or its immediate aftermath to allow her to recover. The Court of Appeal, overturning the trial judge, held that she was not, and in so doing reiterate the "thus far and no further" philosophy of Lord Steyn in Frost.  

In Mid Essex Hospital Services NHS Trust v Compass Group UK and Ireland Ltd (trading as Medirest) [2013] EWCA Civ 200, the plaintiff Trust and defendant hospital service provider entered into a complicated contract under which the defendant was to provide certain services to hospitals managed by the plaintiff. The two most material terms of the contract for present purposes were Clauses 3.5 and 5.8. Clause 3.5 contained language which required the parties to "cooperate with each other in good faith" while Clause 5.8 entitled the plaintiff to award "service failure points" and deduct payments from the defendant in respect of the latter's lapses in service standards.

At first instance, the trial judge held that Clause 5.8 conferred a discretion on the plaintiff, and that there was an implied term that the plaintiff would not exercise this discretion irrationally or absurdly. The trial judge held that the plaintiff by its actions breached this implied term, and was therefore also in breach of its duty to cooperate with the defendant under Clause 3.5

The Court of Appeal disagreed, essentially because it came to a different interpretation of the relevant clauses and their effect. In the course of its decision, the Court of Appeal had some interesting remarks to make on the proper role of contractual good faith. In particular, the Court of Appeal considered that the implied term which the trial judge had found could only exist where the nature of the contractual discretion required it to: if, as in this case, the relevant discretion was limited to a decision of whether or not to exercise a contractual power (as opposed to the manner of exercising it), there was no need for such an implied term.

Kind regards,

Colin