England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE EMPLOYMENT APPEAL TRIBUNAL
(MR. RECORDER BRIAN LANGSTAFF Q.C.)

		Royal Courts of Justice Strand London WC2 Wednesday, 25th July 2001

Wednesday, 25th July 2001

J U D G M E N T
1. LORD JUSTICE PILL: This is an appeal against a decision of the Employment Appeal Tribunal, Mr. Recorder Brian Langstaff Q.C. presiding, given on 9th October 2000. The tribunal allowed an appeal against a decision of an employment tribunal for London North which was sent to the parties on 14th May 1999. The employment tribunal had found that the appellant, Mrs. Garry, was fairly dismissed but (and this is the decision which is the subject of these appeals) that she was the subject of racial discrimination. I set out the facts on the basis of the helpful summary of those material to the present issues in the judgment of the Employment Appeal Tribunal.
2. The appellant was employed by Ealing London Borough Council as a Housing Benefits Rent Team Manager. She commenced that employment in 1991. The finding of discrimination by the council (the respondents) arose out of the conduct of investigations into the possible abuse by her of public funds.
3. In 1996, the manager of the respondents' investigation team was told that the appellant, who had previously been employed by another London Borough, had been subject to investigation in respect of possible housing benefit fraud. The tribunal found that, irrespective of the appellant's ethnic origin (which was African; she was from Nigeria) an investigation would have commenced. There were, however, two types of investigator. One had financial targets and conducted investigations on a time-limited basis. The other undertook special investigations on a larger scale and in respect of which there were no restrictions by reference to the need to meet targets and time limits. The investigator appointed was Mr. Ravinder Singh, who was a special investigator.
4. In May 1997 the appellant became aware that she was under investigation and in June she was interviewed by an officer from the Borough's Internal Audit. On 4th August 1997 the audit officer and Mr. Singh reported in writing to Mr. Dallison, the borough's Director of Regeneration and Housing. Shortly after that date, Mr. Dallison concluded that there was insufficient evidence to require a disciplinary hearing in the matter. He did not, however, tell the appellant of his decision; neither did he tell Internal Audit or Mr. Singh.
5. Nine months later, on 28th May 1998, the appellant wrote to enquire what had happened to the enquiry. She wrote a further letter on 27th July and, in reply to that, was told that "no further action is intended".
6. The Employment Appeal Tribunal referred to other findings of the employment tribunal which are not now material. They drew attention to the finding that Mr. Dallison had been wrong not to have alerted either the appellant or Internal Audit of his decision not to take disciplinary action against her. The employment tribunal had, however, concluded that the appellant had not been discriminated against on that ground because of her ethnic origin. It was a simple error amounting to incompetence but not discrimination. At paragraph 27 the employment tribunal found:

"...At the time that [Ealing] received the referral about [Mrs. Garry], all they were aware of was that there was an issue about Housing Benefit fraud falling outside their area. If that were the only query there would be no reason for [Ealing] to have allocated anything other than one of their normal officers to investigate this matter. Why therefore should Ravinder Singh who is one of the special investigators to look at large scale fraud be appointed to look at this matter when the referral related only to two properties outside the London Borough of Ealing? No plausible explanation was given on this matter. The Tribunal therefore concluded that it must be that [Ealing] assumed that because [Mrs. Garry] was Nigerian this was likely to be a much bigger scale enquiry and therefore allocated a special investigator to the matter. This is an assumption based on stereo-typing. It is a matter that arises from her ethnic origin."

7. At paragraph 30, the employment tribunal found, by reference to the report which was submitted to Mr. Dallison:

"The report recommends that disciplinary action be taken against the Applicant [the present appellant]. The Tribunal concluded that but for the fact this investigation was being conducted by somebody who did not have fixed targets to meet and that was only because the Applicant was Nigerian, the investigation would then have concluded. Mr. Dallison made his decision some time in August/September 1997 that he was not going to take any disciplinary action. As indicated above the Tribunal finds that his failure to advise the Applicant, Audit and the Housing Benefit Investigation Team of his decision reflects poor practice. The consequences of his poor practice, however, had an impact on the Applicant. The investigation continued. No one person appears to have taken responsibility for the investigation. Nick Hibbard said he conducted investigations only at the request of Mr Singh. Mr Bailey says that it was a joint investigation between Mr Hibbard and Mr Singh but Mr Hibbard had control. The purpose of the investigation had started off as a Housing Benefit fraud investigation, veered off to become an investigation into the Tenants Incentive Scheme. On concluding that matter there appears to have been no one who questioned what was the purpose of continuing and the authority to continue the investigation. Had there been an officer appointed who was being properly supervised this would not have happened. However, as the assumption appears to be made that this was a large scale fraud, the investigation was allowed to drift on with the Applicant being left unaware of what was happening. It is at this point that the Tribunal finds that the Applicant suffered a detriment. Prior to the decision made by Mr. Dallison, the events were those that would happen in any event regardless of who had been appointed to investigate. However had the assumption not been made at the outset, in relation to the nature of the investigation, the matter would have been reviewed; it would not have been found to be financially worthwhile to proceed with the investigation as targets would be missed and the Applicant could have been told quickly what the outcome was. From that point onwards however an investigation continued, the Applicant was not aware of what was happening and this was something that would not have happened but for the fact that she was Nigerian. The Tribunal therefore concludes that the manner in which the investigation was started and continued up until the time that Mr. Dallison was able to take a decision about the disciplinary action was not a matter where she was treated to her detriment because of her ethnic origin. The person appointed to conduct the investigation was a matter that related to her ethnic origin but that this did not act to her detriment until such time as the proceedings would normally have come to a conclusion i.e. when Mr. Dallison had made the decision not to take the matter any further internally. From that point the Applicant was the subject of a detriment within the meaning of section 4(2)(c) of the Race Relations Act 1976. She was not aware of the ongoing investigation which should have terminated at a much earlier date".

8. I have to say that paragraph 30 has not been found easy by those who have subsequently had to deal with the case.
9. The employment tribunal went on to state its conclusion at paragraph 36:

"... The Applicant was the subject of discrimination on the grounds of her ethnic origin because the investigation that was commenced into her circumstances continued way beyond a date where it should reasonably have been concluded".

10. Section 1 of the Race Relations Act 1976 ("the 1976 Act") provides, so far as is material:

"(1) A person discriminates against another in any circumstances relevant to the purposes of any provision of this Act if --

(a) on racial grounds he treats that other less favourably than he treats or would treat other persons."

11. Section 4(2) provides:

"It is unlawful for a person, in the case of a person employed by him at an establishment in Great Britain, to discriminate against that employee --

.....

(c) by dismissing him, or subjecting him to any other detriment."

12. "Other" is a reference to detriments other than those otherwise set out in paragraphs (a) and (b) and (c). Reading the material words together in the present context, the appropriate provision reads:

"It is unlawful for an employer, on racial grounds, to treat an employee less favourably than he treats or would treat other employees by subjecting her to any other detriment".

13. Before the Employment Appeal Tribunal it was argued on behalf of the present respondents that the tribunal were not entitled to conclude that there was any discrimination against the appellant on the ground of race. On that subject, the EAT concluded at paragraph 20: "Although we have already expressed our reservations about whether we, ourselves, would have drawn the same inference in the circumstances, we cannot say that the inference was in the circumstances one which it was wholly impermissible to draw. We have to remember that we did not see the witnesses, nor have before us the range of documentary material which the tribunal had. Accordingly, we consider that we should turn to examine the question whether there was, in the circumstances of the case, any detriment to Mrs. Garry arising from the different treatment of her by Ealing on the ground of her race."
14. I confess that I have reservations similar to those expressed by the Employment Appeal Tribunal in that paragraph, but I agree with the conclusion they reached. There is no cross-appeal against that conclusion.
15. The Employment Appeal Tribunal stated at paragraph 26 that it was common ground before them that the likely extent of the "continuing investigation" (that is, after August 1997) was a few phone calls. Mr. Egan for the respondent accepts that, on the material which had been before the employment tribunal, that is to put it somewhat too low. Documents show that the investigation did continue, albeit not in a very active way. Any difference is not material for present purposes.
16. The tribunal went on to find in paragraph 34:

"We are conscious that the question whether or not certain treatment is less favourable within the meaning of section 1 of the 1976 Act, and the question whether, if it is less favourable, it constitutes a detriment within the employment context, are ultimately questions of fact. We cannot interfere with the finding of fact unless there is no reasonable basis upon which the Employment Tribunal could reach the conclusion it did. However, try as we can, we can find no reasonable basis for thinking that there was in the circumstances as found by the Employment Tribunal anything that could realistically be described as a detriment to her arising out of her lack of awareness of the continuation of the investigation. This is so even if we were to assume that a continuing investigation, minimal as it was, amounted to less favourable treatment on the grounds of race because of its genesis as described by the Employment Tribunal."

17. It is clear that the second way in which the point is put in that paragraph was argued before the Employment Appeal Tribunal, the tribunal setting out in the previous paragraph the submissions of counsel then acting for the appellant.
18. The Employment Appeal Tribunal went on to say:"Accordingly, we conclude that the tribunal failed to identify anything that could truly be called a detriment to Mrs. Garry or (if they intended to say that the lack of awareness was such a detriment) reached a conclusion which they could not reasonably do on the evidence that they accepted."
19. The reasoning of the Employment Appeal Tribunal appears at paragraph 31:

"We consider that it must be difficult in any case to say, as the tribunal appear to have said, that the lack of awareness of steps being taken might (but do not in the event) result in disadvantage. The adage, 'ignorance is bliss' is realistic in such a case. As one of the members of the tribunal observed in the course of argument, if a tax payer is aware that the Inland Revenue has begun an investigation into his affairs, he might well be seriously worried. If, however, he learns after the event that they have conducted such an investigation, but it has led to no charge or penalty, he would in the event be very much less concerned, and possibly even relieved."

20. I add in passing that I find the finding of fact of the employment tribunal to which I have referred (that the appellant was not aware of the on-going investigation) difficult to understand. She wrote on 28th May 1998 the letter already referred to, in the course of which she said:

"I have endured continued uncertainty since May 1997 when this was first raised. I am now requesting that this matter be resolved".

21. She wished to be told of the result of the enquiry, but her wording suggests that she believed the enquiry was still continuing. Whether or not that is right, in my judgment it is neither necessary nor appropriate to review the findings of fact of the employment tribunal to reach a result in this case.
22. In De Souza v. The Automobile Association [1986] IRLR 103 an employee who was a woman of mixed race complained to an industrial tribunal of unlawful racial discrimination by her employers. She alleged that she had overheard one of her managers refer to her as "the wog", and that it was a racial insult which constituted a detriment within the meaning of section 4(2)(c) of the 1976 Act. May L.J. referred to an earlier case (page 106):

"We were referred to a number of authorities, amongst them Ministry of Defence v. Jeremiah [1979] IRLR 436. That was a case under s.6(2)(b) of the Sex Discrimination Act 1975, which in so far as is presently material is in the same terms as s.4(2)(c) of the Race Relations Act 1976. A male employee complained that he was being discriminated against compared with female employees doing nominally the same job, in that he and his fellows were required to do a particularly dirty part of the job which their female colleagues were not. The question arose whether the men were being subjected 'to any other detriment'. At page 438 of the report Lord Justice Brandon said:

"I do not regard the expression 'subjecting.....to any other detriment' as meaning anything more than 'putting under a disadvantage'."

23. Lord Justice Brightman, in his turn, said at page 440:

"I think that a detriment exists if a reasonable worker would or might take the view that the duty was in all the circumstances to his detriment".

24. Lord Justice May took a similar view. He stated

at page 107:

"Apart from the actual decisions in these cases, I think that this necessarily follows upon a proper construction of s.4, and in particular s.4(2)(c) of the Act. Racially to insult a coloured employee is not enough by itself, even if that insult caused him or her distress; before the employee can be said to have been subjected to 'some other detriment' the court or Tribunal must find that by reason of the act or acts complained of a reasonable worker would or might take the view that he had thereby been disadvantaged in the circumstances in which he had thereafter to work".

25. Dealing with the facts of the particular case, Lord Justice May stated at page 107:

"Although the Industrial Tribunal said that the use of the insult showed that all was not well in the appellant's department at the time of the remark and that there was an element of racial prejudice there, I do not read this as a finding of fact at all, but in any event certainly not one that the appellant was disadvantaged in the sense and context to which I have referred. Further, if this was intended to be a finding of fact to this effect within the principles I have outlined, I respectfully do not think that there was any evidence to support it."

26. The following findings emerge clearly from paragraph 30 of the decision of the employment tribunal:

1. But for the fact that the investigation was being conducted by somebody who did not have fixed targets to meet (and that was only because the applicant was Nigerian), the investigation would have concluded in August 1997.

2. The person appointed to conduct the investigation was a factor that related to the appellant's ethnic origin, but this did not act to her detriment until such time as the proceedings would normally have come to a conclusion. From that point the applicant was the subject of a detriment within the meaning of section 4(2)(c).

3. The failure to inform her by Mr. Dallison was the result not of racial discrimination but of lack of skill amounting to incompetence and should not be a factor in the decision.

27. Mr. Egan for the respondents rightly accepts that the Employment Appeal Tribunal was entitled to reverse the relevant finding of the employment tribunal only if that finding was perverse. Mr. Egan submits that, applying the test approved in De Souza, there was no detriment to the appellant. Moreover, given her lack of knowledge (if that be the case as found by the employment tribunal), there is no detriment in any event.
28. In my judgment, the conclusion of the employment tribunal expressed at paragraph 36 was correct. I bear in mind the following factors;

1. The appellant had a responsible position with the Borough Council. She was a Housing Benefits Rent Team Manager with seven years' seniority.

2. She was under investigation for fraud involving a possible abuse of public funds – circumstances, including the appointment of a special investigator, which were plainly of a serious kind.

3. She was subject to a formal investigation. That investigation continued for nine months longer than it would otherwise have done, even though not in a very active manner, and it continued because of her ethnic origin. I see no difficulty with causation.

4. It must have been general knowledge, certainly among the officers of the council in senior positions, that the appellant was the subject of this serious and lengthy investigation. When that state of affairs was known to the appellant, she was, in my judgment, entitled to say that it amounted to less favourable treatment which was to her detriment because of her ethnic origin. It plainly was to her detriment.

29. In my view, the finding of the employment tribunal not only was not perverse, it was, in the circumstances, a correct finding. The fact that the appellant was unaware at the time of what was going on (if that be the case) does not provide the respondents with a defence if, on analysis, their treatment of her was to her detriment. In the circumstances, it was no less a detriment in that for a time she was unaware of it. The adage relied on by the Employment Appeal Tribunal that "ignorance is bliss" is in the present circumstances misplaced. The analogy drawn by the Employment Appeal Tribunal with an Inland Revenue investigation is also misplaced. That type of investigation is one confidential to the Revenue and the member of the public concerned. The present investigation was known to officers of the council whose attitude to the appellant and her work was important in the context of her present and future employment with the council. The detriment appears to me to be obvious and the fact that the employment tribunal did not spell it out as plainly as they might have done does not, in my judgment, affect the validity of their conclusion.
30. For those reasons I would allow this appeal.
31. LORD JUSTICE MAY: I agree that this appeal should be allowed for the reasons which Lord Justice Pill has given.
32. In August or early September 1997, as my Lord has described, Mr. Dallison decided that the investigation of which Mrs. Garry was the subject should terminate and that disciplinary proceedings against her should not be taken. He failed to see that Mrs. Garry was told of this decision and also (amazingly, to my mind) failed to tell the investigating team that they should stop. In fact they went on investigating until at least 6th January 1998, as is demonstrated by notes of their activities in the court bundle. Mrs. Garry was told nothing until, on 28th May 1998, she wrote at length expressing concern and understandably saying that she had endured continuing uncertainty since May of the previous year. It was not until July 1998 that she was told that the matter was closed.
33. Mr. Egan accepts, and indeed it was the respondent's case, that all this arose because Mr. Dallison was, as Mr. Egan puts it, incompetent. He submits that the employment tribunal found that it resulted from poor practice (which may be a euphemism for incompetence) and he points out that Mrs. Garry did not at the time know that the investigation continued. He submits the Employment Appeal Tribunal were correct in concluding that the finding of the employment tribunal that Mrs. Garry suffered a detriment within the terms of the passage in the judgment of May L.J. in De Souza v. Automobile Association [1986] ICR 514 at 522G, to which Lord Justice Pill has referred, was not supportable. The employment tribunal found that the appointment of a special investigator rather than an ordinary investigator was racially motivated but that this did not result in detriment to Mrs. Garry until after the Mr. Dallison made his decision. Their finding was that thereafter there was detriment because, despite Mr. Dallison's decision, the investigation continued when, had there been an ordinary investigation, it would have come to an end in September 1997 or earlier for want of financial return.
34. There is something of a logic, I think, in Mr. Egan's suggestion that, if there was detriment in the delay in informing Mrs. Garry that the investigation had come to an end, that was a result of Mr. Dallison's incompetence and not a result of the racially motivated appointment of the special investigator.
35. As to detriment, I agree with Lord Justice Pill that Mrs. Garry is entitled to say that it was detrimental to her in the sense that she was disadvantaged in the circumstances in which she had thereafter to work and that she had, during this period, continued to work for the respondents in circumstances in which, as she now knows, there were people at the respondents who knew that she was still the subject of an extended investigation. The employment tribunal were also, I think, notwithstanding Mr. Egan's submission, entitled to conclude, as in substance they did, that this was caused by the original appointment of the special investigator. An ordinary investigation would have come to an end by a different mechanism. It seems to me that the employment tribunal were entitled to take the view that Mr. Dallison's intervention and subsequent failure to see that his decision was carried through was part of the package whose first component was the original appointment.
36. On this basis I consider that the decision of the employment tribunal was supportable. The Employment Appeal Tribunal decision to the contrary on the question of detriment was wrong, and I agree that this appeal should be allowed.
37. MR. JUSTICE RIMER:I agree with both judgments.
38. The finding of the Employment Tribunal was that the London Borough of Ealing would have carried out an investigation into Mrs. Garry's activities anyway, but that its choice of a potentially larger scale investigation, conducted by a special investigator, was motivated by racial grounds and amounted to less favourable treatment of Mrs. Garry within the meaning of section 1(1)(a) of the Race Relations Act 1976.
39. The tribunal found also that, had the Borough instead opted for its alternative type of investigation (one conducted by an officer subject to restrictions imposed by time restraints and financial targets) the investigation would have followed the same course as the chosen one, at any rate down to about August 1997, and that its future would have been reviewed at that point. The result would have been that the investigation would not have been proceeded with further and Mrs. Garry would then have been told of the outcome, namely that no disciplinary proceedings were to be taken against her. The same result might have been achieved even under the particular type of investigation which the Borough in fact chose to instigate, but it did not. Sometime in about August 1997 Mr. Dallison made a decision that no disciplinary proceedings were to be taken against Mrs. Garry, but he failed to communicate that decision either to her or, it seems, to anyone else. Thereafter those concerned with the investigation continued it, at least to the extent of making further enquiries of various sorts, albeit of a fairly limited nature.
40. In these circumstances I have been a little troubled, having regard to the facts which Lord Justice May has explained, as to whether it might be said that the real cause of the continued investigation was simply Mr. Dallison's incompetent failure to communicate his decision to all who were interested in it. If so, then bearing in mind that it was accepted that his failure in that respect was not in any manner racially motivated, it might then have been said to follow that, in so far as Mrs. Garry suffered any detriment by reason of the continued enquiry, it was not caused by the original discriminatory decision which the Borough made as to the type of investigation appropriate for Mrs. Garry's case.
41. I am satisfied, however, that such a conclusion would not be a correct one in the light of the findings of the Employment Tribunal. The Tribunal does not appear to have regarded the explanation of the continued investigation as being referable simply to Mr. Dallison's failure to stop it. It is true that at one point in paragraph 30 of its reasons it appears to have indicated that those failures were the reason why the investigation continued. But, in agreement with Lord Justice Pill, I read the remainder of the same paragraph, from which he has quoted extensively, as reflecting the Tribunal's finding that the real explanation as to why it continued was because of the nature of the particular method of investigation for which the Borough had opted at outset, being an investigation for which, as the Tribunal found, no one person appears to have taken responsibility. In the light of the Tribunal's findings on that aspect of the case, I therefore do not consider that the continued investigation can be regarded as being exclusively referable to, and caused by, Mr. Dallison's failures. I consider that it can be said, as I regard the Tribunal as having found, to have been the consequence of the original discriminatory method of investigation which the Borough favoured.
42. As to whether the continued investigation can be regarded as resulting in Mrs. Garry suffering detriment for the purposes of section 4(2)(c) of the 1976 Act, I entirely agree with what my Lords have said about that and there is nothing that I can usefully add.
43. I, too, would allow the appeal.
ORDER: Appeal allowed; decision of EAT remitted to (if possible) the same employment tribunal as that sitting in April 1999; appellants to have their costs of the appeal. (ORDER NOT PART OF APPROVED JUDGMENT)