England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE EMPLOYMENT APPEAL
TRIBUNAL (HIS HONOUR JUDGE McMULLEN QC,
MRS R CHAPMAN and MR R A LYONS)
UKEAT 025006LA

		Royal Courts of Justice Strand, London, WC2A 2LL
		23/05/2008

Lord Justice Maurice Kay :

1. These appeals and connected applications for permission to appeal represent the latest stage in protracted litigation between Mrs King and Mrs Khan (the appellants) and the Home Office (the respondent). For all present purposes, the appellants are advancing identical cases. They were employed by the respondent as interpreters at Terminal 3, Heathrow. Mrs King, an Asian Iranian of Armenian descent, commenced employment on 22 October 1979. Mrs Khan, an Asian Indian of Sikh descent, followed on 1 April 1985. Annual appraisals of their performance were highly commendatory. However, from 1988 or 1990 the respondent began to develop the view that its need for interpreters at Terminal 3 and elsewhere would be better met by the engagement of freelance interpreters. No new interpreters were employed as staff interpreters but thousands of freelances have been deployed. From 1995 onwards, the appellants complained about the preferential treatment of freelances. On 13 September 2001, through solicitors, they sought to invoke the grievance procedure in respect of various complaints including race and sex discrimination. It is now beyond dispute that the respondent treated the appellants very badly in dealing or failing to deal with their grievances. In due course, an Employment Tribunal (ET) held that treatment to amount to race and sex discrimination and the respondent does not take issue with that finding.
2. The appellants were on sick leave due to stress from October/November 2001 until 30 September 2002. They refused to return to work at Terminal 3 at the end of their sick leave. They were put on special paid leave pending identification of suitable alternative interpreter positions. However, no successful redeployment ensued. Time passed. Correspondence produced no satisfactory outcome. On 22 October 2003 Mr Wild, Deputy Director of Human Resources in the Immigration and Nationality Directorate and one of the many HR managers to have dealings with the appellants, wrote to them and said "you are certainly not redundant". It seems that he was under the misapprehension that their employment was subject to a mobility clause. Such proposals as were made to the appellants were rejected. On 5 July 2004 Mr Wild wrote to the appellants stating that they were redundant and that they were not required to accept redeployment (because he now had legal advice to the effect that, exceptionally, the appellants did not have a mobility clause in their contracts). He said he remained willing to discuss redeployment possibilities but, if the appellants were not prepared to consider them, their employment would be terminated on the ground of redundancy. The response of the appellants was that

"… we have lost all trust and confidence that this matter will be dealt with impartially or fairly by you."

3. In August 2004, Ms Murrell, Assistant Director of Human Resources, met with the appellants. She offered them redeployment to jobs which they considered to be non-existent or bogus, involving a variety of administrative and minor management tasks at a different Heathrow Terminal. They rejected the offer. Further polarised correspondence ensued until Ms Murrell gave way to her superior, Mrs Ackland, Deputy Director of Human Resources. In November 2004 Mrs Ackland decided that, in view of the reiterated refusal of the offered jobs, the appellants should be dismissed for redundancy. Ms Murrell drafted but did not send a letter to the appellants on 22 November 2004 and formal letters of dismissal with immediate effect were sent by Mrs Ackland on 4 February 2005.
4. This is a very attenuated rehearsal of the factual background. A fuller one is no longer necessary in view of the limited scope of the issues in this court. The judgment of the Employment Appeal Tribunal (His Honour Judge McMullen QC, Mrs R Chapman and Mr R A Lyons) which has given rise to this appeal, began with excoriating criticism of the respondent's human resources management of the appellants over the years. That management were dilatory, unreasonable, unfair and discriminatory is incontrovertible. In each of the years 2002, 2003, 2004 and 2005, the appellants presented identical pairs of complaints to the ET. There were five pairs of complaints in all. The first three alleged race discrimination and, eventually, victimisation. The fourth alleged race and sex discrimination and victimisation, as did the fifth which added allegations of unfair dismissal, breach of contract/unauthorised deduction from wages and protected whistleblowing.
5. Following a long hearing in the ET, the principal holdings in its decision on liability promulgated on 16 November 2005 were:

i) The appellants had been treated less favourably on grounds of their sex and on racial grounds in that the respondent had failed properly to deal with their grievances relating to sex and race discrimination.

ii) The appellants had been unfairly dismissed. Although the reason for dismissal was redundancy, the respondent had not acted reasonably in dismissing them mainly because it had not acted in accordance with its own redundancy policy and procedure and because

"all efforts were not reasonably made to avoid the termination of … employment in the circumstances."

iii) The dismissals were not the result of race or sex discrimination, victimisation or the making of protected disclosures.

iv) Other complaints about pay, special leave and the failure to make payments under the Civil Service Compensation Scheme (CSCS) were not the result of race or sex discrimination, victimisation or the making of protected disclosures.

v) Complaints of breach of contract in the form of failure to pay shift disturbance allowance during the period of sick leave beginning in November 2001 and the period of special leave from 1 October 2002 until dismissal on 4 February 2005 were well-founded to the extent of 60 days per year (with a pro-rata figure for 2005).

6. The judgment of the EAT, dated 17 November 2006, resulted in a degree of further success for the appellants in that it was held that the dismissals were also automatically unfair pursuant to section 98A of the Employment Rights Act 1996 because the respondent had failed to deal with the appellants' internal appeals against dismissal "with no unreasonable delay". This enabled the appellants to claim an uplift in their compensation for unfair dismissal. Also, by reference to a new point which the EAT permitted to be taken on appeal, the appellants established a claim to a shift allowance.

The appeal to this court

7. The present appeal seeks to enlarge the findings on race and sex discrimination or at least to establish that the ET, and in due course the EAT, were wrong in law to reject the claims of discrimination in relation to the dismissals and in relation to remuneration rates, resort to special leave and the failure to make payments pursuant to the CSCS. The central ground of appeal is that the ET failed to approach the burden of proof in the manner required by section 54A of the Race Relations Act 1976, section 63A of the Sex Discrimination Act 1975 and the approach set out in Igen Ltd v Wong [2005] EWCA Civ 142, [2005] ICR 931 and later authorities. There is a secondary ground of appeal to the effect that the rejection of these complaints is afflicted by an insufficiency of reasoning.

1. The burden of proof

8. The material part of section 63A of the Sex Discrimination Act 1975, as inserted by regulation 5 of the Sex Discrimination (Indirect Discrimination and Burden of Proof) Regulations 2001, provides:

"(2) Where, on the hearing of the complaint, the complainant proves facts from which the tribunal could, apart from this section, conclude in the absence of an adequate explanation that the respondent –

(a) has committed an act of discrimination against the complainant which is unlawful by virtue of Part 2 …

The tribunal shall uphold the complaint unless the respondent proves that he did not commit … that act."

Section 54A of the Race Relations Act 1976, as inserted by regulation 41 of the Race Relations Act 1976 (Amendment) Regulations 2003, is in substantially the same terms.

9. These provisions, driven as they were by the Burden of Proof Directive, Council Directive 97/80EC of 15 December 1997, modified the approach which had prevailed in this country since King v Great Britain – China Centre [1992] ICR 516. The new provisions were the subject of guidance given by the EAT in Barton v Investec Securities Limited [2003] ICR 1205, which guidance was later refined by the Court of Appeal in Igen Ltd v Wong. The refined guidance is set out in an annex to the judgment at pages 956-957. In the body of the judgment of the Court, given by Peter Gibson LJ, it is stated:

"18… It is for the applicant complaining of discrimination only to make out his or her case to satisfy the first stage requirements. If the second stage is reached, and the respondent's explanation is inadequate, it will be not merely legitimate but also necessary for the employment tribunal to conclude that the complaint should be upheld. The statutory amendments shift the evidential burden of proof to the respondent if the complainant proves what he or she is required to prove at the first stage.

19. Although we have referred to the two stages in the employment tribunal's decision-making process, we do not thereby intend to suggest that employment tribunals should divide hearings into two parts to correspond to those stages. No doubt tribunals will generally wish to hear all the evidence, including the respondent's explanation, before deciding whether the requirements at the first stage are satisfied and, if so, whether the respondent has discharged the onus shifted to him."

10. In Laing v Manchester City Council [2006] IRLR 748, Elias J said:

"75. The focus of the tribunal's analysis must at all times be the question whether or not they can properly and fairly infer race discrimination. If they are satisfied that the reason given by the employer is a genuine one, and does not disclose either conscious or unconscious racial discrimination, then that is the end of the matter …

76. Whilst … it will often be desirable for a tribunal to go through the two stages suggested in Igen, it is not necessarily an error of law to fail to do so …The reason for the two stage approach is that there may be circumstances where it could be to the detriment of the employee if there were a prima facie case and no burden was placed on the employer, because they may be imposing a burden on the employee which he cannot fairly be expected to have discharged and which should evidentially have shifted to the employer. But where the tribunal has effectively acted at least on the assumption that the burden may have shifted, and has considered the explanation put forward by the employer, then there is no prejudice to the employee whatsoever."

11. The approach of Elias J in Laing was expressly approved by the Court of Appeal in Madarassy v Nomura International plc [2007] EWCA Civ 33, [2007] ICR 867, at paragraph 79 (per Mummery LJ, giving the judgment of the court).
12. I have set these passages out at some length to demonstrate how the recent statutory provisions, which initially gave rise to a good deal of confusion and undue complexity in ETs, need not be applied in an overly mechanistic or schematic way. It is now necessary to consider the approach of the ET in the present case. I shall refer to the relevant passages which relate to dismissal, pay, special leave and CSCS.
13. As to dismissal, the tribunal stated (at paragraph 118):

"In respect of the complainants' complaint that they were treated less favourably on racial grounds in being dismissed: the Tribunal found that strong inferences were to be drawn from the Respondent's disregard of its own redundancy procedures and unfair dismissal of the claimants. Nevertheless the Tribunal was satisfied on a balance of probabilities by the Respondent's evidence that the claimants' race had played no part in their dismissal because Mrs Ackland as the dismissing officer convinced the Tribunal that her decision to dismiss them came in November 2004 because she felt that their letters of refusal to accept what she believed to be suitable alternative posts left her with no choice but to make them redundant. It also appeared that Mr Wild was less hands-on at this stage. The Tribunal was satisfied that at that stage the claimants were treated no differently than any hypothetical comparator would have been."

14. As regards pay, the ET held that the appellants had no contractual or other right to be paid at a higher rate than the scale applicable to their positions. They did not qualify for enhancement, which existed in order to address problems of recruitment and retention of specialist staff and depended on proven cases of business need. The tribunal stated (at paragraph 108):

"This was entirely the opposite to the claimants' position which was that there was no business need whatever because their posts were in fact redundant. Therefore, the Tribunal concluded that the claimants were treated no differently in this respect on the grounds of their race to any hypothetical comparator in materially the same position of effective redundancy."

15. When it came to being placed on special leave, the ET wrongly considered that no detriment had been established. However, this error was corrected by the EAT and no issue now arises in relation to it. The ET then concluded (at paragraph 117):

"… the respondent would have treated any hypothetical comparator who had refused to return to Terminal 3 in the same way …The Tribunal accepted that this was an attempt to post them in which race considerations had played no part."

16. In supplementary reasons, supplied in answer to questions posed by the EAT, the ET observed that there were no staff interpreting posts into which the appellants could be placed.

"They were therefore placed on special leave while the respondent sought a solution to the impasse … the appellants' exclusion from the workplace was not because of their race … but because the respondent did not know what else to do in the circumstances while it sought a solution."

17. On behalf of the appellants, Mr Aziz accepts that the decision of the ET contains a correct exposition of the law. His primary submission is that it erred in its application of that law. His secondary submission is that there is an insufficiency of reasoning in the rejection of discrimination in relation to the four matters. I shall consider the primary submission in relation to the four matters sequentially. I shall then dispose of the reasons point more briefly.

(1) Dismissal

18. The case for the appellants before the ET was that the true reason for their dismissal was not redundancy but a discriminatory reason and that "the process and procedure … constituted less favourable treatment". In this appeal, Mr Aziz focuses not on the fact of the reason for dismissal, as to which he accepts the finding of redundancy, but on the "process and procedure". He criticises the analysis of the ET , submitting that it erred in its approach to the burden of proof and that, having found the earlier handling of the appellants' grievances to have been discriminatory, it ought not have been satisfied that there was a non-discriminatory reason for the respondent failing to comply with its own redundancy policy and procedures.
19. It is common ground that in paragraph 118 of its decision (set out at paragraph 13 above), the ET was addressing both the procedural and the substantive aspects of the dismissal. That is inherent in the words "being dismissed". However, Mr Aziz submits that the tribunal erred by not approaching the matter in a two-stage, Igen way and that the failure to do so diverted it from identifying a non-discriminatory explanation advanced by the respondent and from explaining why such explanation was sufficient.
20. I do not accept these submissions. It is clear from paragraph 118 that, notwithstanding the discrimination which afflicted the earlier history, Mrs Ackland, who had not been party to that discrimination but who was the primary decision-maker during the period leading up to the dismissals, convinced the tribunal that she thought she had no choice but to dismiss the appellants for redundancy and that at that stage the appellants were treated no differently than any hypothetical comparator would have been. In my judgment, it is plain that paragraph 118, read as a whole, is faithful to the statutory requirements in relation to the burden of proof and is consistent with the approach set out in Igen, Laing and Madarassy.

(2) Pay

21. This aspect of the case has suffered from the fact that, at different times, the appellants have put their case in different ways, embracing an alleged contractual entitlement which was withheld by reason of discrimination, failure to pay the market rate by reason of discrimination and failure to enhance by reason of discrimination. In paragraph 108 of its decision (set out in paragraph 14 above), the ET dealt succinctly with these contentions. It held that the appellants had been paid in accordance with their contracts (save in the respects in which their claims succeeded for reasons other than discrimination), that their position was not comparable with freelances and that enhancement did not arise because of the lack of a proven business need. Although there was evidence that all other specialist grades received enhancement, the unique position of the appellants was that "their posts were in effect redundant".
22. It is true that the text of paragraph 108 is not formulated in strict, Igen, two-stage terms but, on the authorities to which I have referred, it does not have to be. The ET had demonstrated its knowledge of the statutory requirements and the relevant authorities elsewhere in the decision. A fair reading of paragraph 108 gives no cause for concern that its conclusion was the result of a legal misdirection or misapplication.
23. One of Mr Aziz's complaints is that on this point, and elsewhere, the conclusion of the ET amounted to an explanation which had not been advanced by the respondent and as to which there was no evidential basis. Mr Tolley disputes this analysis and it would be difficult if not impossible for us to accept it in circumstances in which we have no notes of evidence given at a long hearing. In the end, however, this does not matter. In Bahl v Law Society the Court of Appeal approved the statement of Elias J in the EAT that even if an ET rejects the reason put forward by the respondent,

"the tribunal's own findings of fact may identify an obvious reason for the treatment in issue, other than a discriminatory reason."

Mr Aziz goes as far as to submit that that passage is wrong but it seems to me that it is both correct and binding on this court.

(3) Special Leave

24. The reasoning of the ET is set out in paragraph 117 of its decision (see paragraph 15, above). Leaving aside the error as to detriment, which is of no continuing materiality, paragraph 117 leaves me in no doubt that the respondent provided an explanation which the tribunal accepted and, in so doing, was faithful to the statutory provisions on the burden of proof. The situation facing the respondent was that the appellants were refusing to return to Terminal 3 and there were no staff interpreter posts elsewhere in which they could be placed. If it had been appreciated at the time that the appellants were not subject to a mobility clause, they would probably have been made redundant then, rather than placed on special leave. However, it was not so appreciated and the ET was satisfied that neither race nor sex played a part in the respondent's decision.

(4) CSCS

25. In paragraph 119 of its decision the ET explained, briefly but clearly, why it found no discrimination in the refusal to pay CSCS compensation. It clearly applied the burden of proof requirement correctly – it was "unanimously convinced by the respondent's evidence", which again came from Mrs Ackland. It permissibly found that Mrs Ackland had genuinely believed the appellants to have rejected suitable alternative jobs. Accordingly, the refusal of CSCS compensation was bound to be found non-discriminatory.
26. For all these reasons, I do not accept that the ET fell into legal error in relation to the burden of proof when it concluded that the respondent's approach to dismissal procedure, pay, special leave and CSCS compensation was untainted by race or sex discrimination. It does not follow that, because the respondent was guilty of unlawful discrimination in its woeful inattention to and handling of the appellants' historic grievances, it was also guilty in relation to these other matters. It may well be that, especially when acting in disregard of its own redundancy policy and procedure, the respondent acted unreasonably or unfairly but an employer does not have to establish that he acted reasonably or fairly in order to avoid a finding of discrimination. He has only to establish that the true reason was not discriminatory: Griffiths-Henry v Network Rail Infrastructure Limited [2006] IRLR 865, at paragraph 22, per Elias J. That the respondent has done in relation to the four matters which remain disputed.
27. I turn briefly to Mr Aziz's submission that the ET failed to provide adequate reasons to support its findings of no discrimination on these four matters. The suggestion is that the reasoning fell short of what is required by Meek v City of Birmingham Council [1987] IRLR 250 and English v Emery Reimbold and Strick Limited [2002] EWCA Civ 605. In my judgment, this ground of appeal is utterly unsustainable. In a long decision, following a lengthy and multifaceted hearing, it is not surprising or a matter for criticism that, on some issues, the tribunal expressed its conclusions economically. However, I have had no difficulty, for appellate purposes, in understanding the reasoning or in satisfying myself that the decision of the tribunal was legally compliant in relation to the four matters in issue in this appeal. I am also satisfied that the parties would have had no difficulty in understanding why they won and lost.

Remedy: the application for permission to appeal

28. Following the first EAT decision the case returned to the ET, constituted as previously, for a remedies hearing. The result was the same for each appellant. The ET ordered:

(1) re-engagement;

(2) compensation for injury to feelings in respect of race and sex discrimination: £15,000;

(3) an uplift on the £15,000 of 25% pursuant to section 31 of the Employment Act 2002;

(4) payment of £3,720.14 by way of arrears of shift disturbance allowance;

(5) payment of £1,120 pursuant to section 112(5) of the Employment Rights Act 1996.

29. It declined to award aggravated damages or compensation for "loss of a career in the Home Office". Both parties appealed to the EAT but in the second EAT decision, the appeal and the cross-appeal were dismissed. There is now before this court an application for permission to appeal against the refusal of compensation for loss of a career in the Home Office. As the EAT pointed out, this is essentially a claim for loss of future earnings and was advanced on the (apparently correct) hypothesis that the Home Office will not in fact reengage the appellants.
30. The claim is advanced by reference to Essa v Laing [2004] ICR 746 in which the Court of Appeal held that the correct approach to the assessment of compensation for the statutory tort of direct race discrimination is that the victim should be compensated for the damage or loss which was caused by and arose naturally and directly from the wrongful act, there being no additional requirement of reasonable foreseeability of the damage or loss. Mr Aziz submits that, on the findings of the ET, there was a causal link between the established discrimination (mishandling the grievances) and the loss of career because the discrimination gave rise to a diminution of trust which affected the attitude of the appellants to redeployment and that, but for that, they would probably have remained in the employment of the Home Office. In support of this submission he points to passages in the first (liability) decision of the ET and in the second (remedies) decision and suggests that there is an unsustainable tension between them.
31. In paragraph 114 of the liability decision, the ET said that the proven discrimination had led to:

"detriment in hurt feelings and diminution of trust which did not assist [the appellants] in responding to the need to engage at an earlier stage with the process of their redeployment which may in turn have led to their continued employment …"

32. Its treatment of the claim in the remedies decision is to be found in paragraph 35. Having referred back to paragraph 114 of the liability decision, the ET said:

"However, this was part of a much broader picture of the engendering of mistrust … as set out in the Reasons … together with the Tribunal's earlier finding that the Claimants were difficult … The Tribunal concluded unanimously on all the evidence that it could not be said that the … loss of career flowed directly and naturally from the mistrust engendered by the … acts of sex and/or race discrimination, as distinct from unreasonable treatment constituting their unfair dismissal or from their other grievances relating to lack of work, humiliating comments from colleagues and unequal pay. The chance that if the Respondent had properly dealt with … the sex and race discrimination grievances, but in all other respects had behaved as it did, that this would have had any measurable impact on the Claimants' level of mistrust to the extent that their willingness to engage in the employment process would have been significantly increased is, in the Tribunal's unanimous view, remote indeed."

33. Earlier in the decision, the Tribunal had referred expressly to Essa v Laing and had correctly stated the proposition for which it is authority.
34. Mr Aziz submits that the conclusion of the ET in the remedies decision is vitiated by legal error because the finding in paragraph 114 of the liability decision was to the effect that the dismissals would probably not have occurred but for the discriminatory treatment of the grievances and the appellants' consequent lack of trust in their manager because the appellants would have accepted redeployment. Thus, the "loss of careers" flowed directly and naturally from the proven discrimination. In the second EAT decision, Underhill J rejected this submission in the following passage (at para 48):

"We do not read paragraph 114 of the liability [decision] as a finding that the Claimants would probably have remained in employment but for the discrimination which the Tribunal found proved. It is, at most, a finding that there was a chance that they might have done; and, as the Tribunal pointed out in paragraph 35 of its remedy [decision], that finding was made on the basis of the totality of the Respondent's mishandling of their grievances and not specifically related to those (much more limited) aspects of the mishandling which the Tribunal had found to be discriminatory. The question which the Tribunal considered at paragraph 35 for the purpose of its remedy decision was, correctly, whether but for those particular acts of discrimination there was a significant chance that they would have retained their employments. It held that there was no such chance. That was a broad factual assessment of the kind which the Court of Appeal emphasised in Essa v Laing could confidently be left to the good sense of tribunals."

35. Save that I would substitute "probability" for "significant chance", I entirely agree with that analysis. In my judgment the ET correctly stated and applied the principle in Essa v Laing and the proposed appeal would have no real prospect of success.

Conclusion

36. It follows from what I have said that I would dismiss these appeals and refuse the applications for permission to appeal. That does not conclude this litigation because the ET has yet to consider the consequences of the failure of the Home Office to reengage the appellants.

Lord Justice Wall:

37. I agree, and do not wish to add anything.

Lord Justice May:

38. I agree that these appeals should be dismissed and the applications for permission to appeal refused for the reasons given by Maurice Kay LJ.